Nasdaq Plunges 2% as Chip Stocks Lead S&P 500 Lower on AI Spending Fears

• Nasdaq fell more than 2% in early trade, led by sharp semiconductor losses
• AI infrastructure spending concerns triggered de-risking of chip sector positions
• Iran tensions pushed oil higher, adding macro uncertainty to the equity decline
• S&P 500 sank broadly; defensive sectors outperformed as risk-off sentiment dominated

Wall Street opened deep in negative territory, led by a sharp selloff in semiconductor stocks that dragged the Nasdaq down more than two percent within the first hour of trading. The catalyst was a combination of AI-spending skepticism and a renewed uptick in Middle East geopolitical risk that pushed crude oil prices higher. Together, these factors created a challenging backdrop for risk assets, amplifying losses in technology-heavy indices across both US and Asian markets.

The chip sector has been at the center of the market's AI-driven rally, and this selloff reflected growing investor anxiety that valuations had outrun near-term earnings capacity. Several major semiconductor names touched multi-week lows as funds unwound crowded long positions established during the spring rally. Market breadth was negative on both exchanges, suggesting the selling was broad-based rather than isolated to semiconductors, though chips remained the most dramatic drag on performance.

From a market structure perspective, the session underscored the fragility of the AI investment narrative when macro risk factors re-emerge. Treasuries saw modest safe-haven buying with the 10-year yield declining slightly, while oil markets rallied on the Iran headline. The interaction of these forces — tech-sector valuation pressure meeting geopolitical commodity risk — creates a challenging environment and may indicate continued volatility ahead of key earnings reports from major chip and cloud companies.

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