S&P 500 Slips From Record High as AI Concerns Weigh on Chipmakers
The S&P 500 pulled back slightly from its record highs on Tuesday, with losses in the semiconductor sector dragging on performance. Investors were rattled by news that a major U.S. artificial intelligence infrastructure project had hit a snag.
As of 11:57 a.m. ET (16:57 GMT), the Dow Jones Industrial Average was up 70 points (0.2%), while the S&P 500 slipped 0.1%, and the NASDAQ Composite dropped 0.5%.
Chip Stocks Fall on Softened AI Project Plans
Shares of major chipmakers, including NVIDIA (NASDAQ: NVDA), Broadcom (NASDAQ: AVGO), and AMD (NASDAQ: AMD), led the decline after The Wall Street Journal reported that SoftBank and OpenAI had scaled back plans for their ambitious $500 billion “Stargate” project.
Originally, the companies intended to invest $100 billion immediately into building multiple AI data centers. However, the project has been reduced to just a single, smaller facility, dampening optimism about a large-scale expansion of U.S. AI infrastructure and triggering a broader pullback in tech stocks.
Texas Instruments (NASDAQ: TXN) is scheduled to report earnings after Tuesday’s market close, potentially providing further insight into the sector’s health.
Earnings Season Accelerates
The quarterly earnings season is gaining momentum, with over 85% of S&P 500 companies set to release results this week.
So far, about 12% of the index has reported. Of those, 86% have exceeded earnings-per-share estimates, while 67% have topped revenue expectations — contributing to the S&P 500 and Nasdaq reaching record highs in the prior session.
However, early trading saw mixed reactions to individual results:
- Coca-Cola (NYSE: KO) slipped nearly 1% despite beating Q2 profit expectations and projecting earnings at the high end of its prior guidance. Ongoing tariff challenges weighed on investor sentiment.
- General Motors (NYSE: GM) fell as Q2 profits declined significantly, largely due to weaker performance in its North American division.
- Northrop Grumman (NYSE: NOC) gained after raising its full-year profit forecast, citing robust demand for defense and aerospace systems amid rising geopolitical tensions.
- Philip Morris (NYSE: PM) dropped after Q2 revenue missed expectations, despite strong growth in its smoke-free product segment.
- DR Horton (NYSE: DHI) surged following better-than-expected Q3 results, delivering 23,160 homes, beating its guidance.
- Intuitive Surgical (NASDAQ: ISRG) is due to report earnings after the market closes.
Tesla and Alphabet in Focus
All eyes this week will be on Tesla (NASDAQ: TSLA) and Alphabet (NASDAQ: GOOGL) — the first of the so-called “Magnificent Seven” to report this season. Their Q2 results, due Wednesday, are expected to shed light on how Trump’s new tariffs are affecting corporate performance.
Tariff Worries and Fed Policy Uncertainty Linger
Despite recent record highs across U.S. indices, market momentum appears to be slowing due to ongoing uncertainty over Trump’s trade policies and the Federal Reserve’s interest rate path.
Trump has proposed tariffs between 20% and 50% on major trading partners, set to begin August 1, including a 50% tariff on copper and a threatened 200% tariff on pharmaceutical imports.
Investors are concerned these measures could fuel inflation, with the Fed citing tariffs as a key reason to keep interest rates unchanged for now. The FOMC is scheduled to meet next week, and markets broadly expect no change in policy, despite public pressure from Trump for rate cuts.
Fed Chair Jerome Powell is scheduled to speak later Tuesday at a D.C. conference. However, it’s unclear whether he’ll touch on monetary policy, as the central bank is currently in its pre-meeting blackout period.
