Wall Street's major benchmark averages closed at more than one-week lows on Tuesday (Wednesday AEST), as an extended sell-off in semiconductor shares weighed on sentiment amid growing concerns over debt-funded artificial intelligence investment and expectations of a more hawkish United States Federal Reserve.
The Dow Jones Industrial Average fell 47.2 points, or 0.1%, to 51,665.5. The S&P 500 declined 107.3 points, or 1.4%, to 7,365.5, while the Nasdaq Composite dropped 579.6 points, or 2.2%, to 25,587.0.
Technology and semiconductor stocks led the declines. Nvidia fell 4.1%, and Alphabet lost 1%. Intel dropped 6.1%, Marvell Technology plunged 9.4%, and Advanced Micro Devices shed 5.8%.
Investor concerns have increasingly centred on the scale of debt-funded spending by hyperscale technology companies to support artificial intelligence infrastructure.
The sector has come under pressure as market participants question whether returns on massive AI investments will justify rising borrowing levels.
Adding to those concerns, Elon Musk's SpaceX, which made its market debut earlier this month, has joined a growing list of mega-cap companies raising capital through the bond market.
Shares in SpaceX gained 1% after posting losses across the previous three trading sessions.
Memory chipmakers were among the session's weakest performers. Micron Technology and SanDisk, both of which have been among the strongest-performing S&P 500 stocks this year, fell 13.2% and 13.6%, respectively.
Markets are now looking ahead to Micron's quarterly earnings report due on Wednesday (Thursday AEST), which is expected to provide fresh insight into demand trends across the memory chip and broader AI semiconductor sectors following the industry's strong rally this year.
Market volatility also increased, with the CBOE Volatility Index, commonly known as Wall Street's fear gauge, rising 2.23 points to 19.52, its highest level in more than a week.
Investors continued to reassess the outlook for U.S. monetary policy. According to the CME Group FedWatch Tool, traders are increasingly pricing in a second Federal Reserve interest rate increase by December as expectations grow that the central bank under Chair Kevin Warsh will maintain a hawkish stance in its fight against inflation.
Attention is also turning to the upcoming Personal Consumption Expenditures (PCE) Price Index, due on Thursday. The report is the Federal Reserve's preferred measure of inflation and could provide important clues about the future path of interest rates.
On the bond markets, U.S. Treasury yields moved lower. The benchmark 10-year yield slipped 0.2% to 4.499%, while the two-year yield fell 0.7% to 4.2%.
