US stocks declined on Tuesday, with the S&P 500 Index falling from its record, led by a slide in semiconductor and other tech companies.
A report about OpenAI missing its internal sales goals fueled worries about artificial intelligence spending, dragging on a swath of exposed shares. Chip stocks, which ended their record winning streak this week, sold off. The Philadelphia Semiconductor Index, known as the SOX, closed down 3.6%, with all of its 30 members in the red.
The S&P 500 Index fell 0.5%, with chips stocks Nvidia Corp., Broadcom Inc. and Micron Technology Inc. among top decliners on a points basis. The tech-heavy Nasdaq 100 Index fell 1%. Brent crude rose nearly 3% to $111 per barrel.
OpenAI failed to meet its own targets for new user acquisition and sales for several months recently, fueling internal concerns that the ChatGPT operator may grapple with supporting its spending on AI infrastructure, the Wall Street Journal reported.
The tech declines come as four hyperscalers - Amazon.com Inc., Alphabet Inc., Meta Platforms Inc. and Microsoft Corp. - prepare to report financial results Wednesday during the busiest week of this earnings season. Stocks linked to OpenAI, such as CoreWeave Inc. and Oracle Corp. slid by more than 4% even as OpenAI pushed back against concerns over its growth.
"We are back to the circular financing concerns that we had before the Iran conflict," said Brian Mulberry, chief market strategist at Zacks Investment Management, adding that the market's reaction isn't quite driven by fundamentals. "What you are seeing is the kind of connected effect of OpenAI's spending commitments impacting directly a number of names that are out there, like Oracle and CoreWeave."
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Before Tuesday, tech stocks had lifted the S&P 500 Index higher on revived optimism around AI trades even as high oil prices amid deadlocked Iran peace talks cast doubt on other sectors. While the tech stock rally paused this week, the S&P 500 information technology sector is still up 18% in April, on course for its best month since 2002.
Analysts said the upcoming earnings by some of Wall Street's largest technology companies could provide renewed momentum to the tech trade, with the pullback offering an opportunity to increase exposure because AI demand remains strong.
"Overall, we believe OpenAI has been tracking very high demand on both the consumer and enterprise front and we strongly disagree with the notion that growth is weakening," said Dan Ives, global head of technology research at Wedbush Securities.
At the same time, skepticism triggered by the Middle East conflict is weighing on US earnings, according to strategists at JPMorgan Chase & Co. Some companies are refraining from increasing forecasts despite a strong start to the year, they said.
Meanwhile, the Strait of Hormuz remained shut. US President Donald Trump said Iran wants to open the critical waterway as soon as possible while trying to figure out its leadership situation. CNN reported that mediators in Pakistan expect Iran will submit a revised proposal to end the war in the next few days.
Investors are also monitoring implications on oil and other assets after the United Arab Emirates decided to leave the OPEC and OPEC+ oil producer groups as of May 1 as part of a strategic realignment in the wake of the Iran war.
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With Iran peace talks still at an impasse, "the idea of grinding higher without interruptions will be unrealistic," said John Stoltzfus, chief investment strategist at Oppenheimer, adding that the depth of the market pullback will likely be "relatively mild compared with what the drama would imply."
On the economic front, the latest reading on the Conference Board showed that US consumer confidence unexpectedly climbed this month to the highest in 2026 despite higher gasoline prices, thanks to a more optimistic outlook for the labor market.
The Federal Reserve is expected to hold interest rates steady on Wednesday. Chair Jerome Powell's is likely to address uncertainty as his key message, according to Lindsey Piegza, chief economist at Stifel Financial Corp.
"I think he's going to underscore again the uncertainty that's plaguing the economy not only because of the international conflicts but because of the nature of the recovery," she said. "Given that I think he's going to emphasize the need for patience."
Financials closed little changed. Earlier, JPMorgan Chase & Co.'s Jamie Dimon again cautioned that a credit market downturn could be worse than expected. Even so, JPMorgan shares were also little changed.
In single-stock moves, Spotify Technology SA plunged more than 12%, the most since July 2023, after the music streaming company forecast lower-than-expected operating income for the second quarter. Corning Inc. sank 8.9%, the most in more than a year, after giving a slightly weaker outlook for second-quarter earnings.
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
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