S&P500 and Nasdaq: Nvidia, AMD Lead Tech Selloff on AI Spending Fears

Nasdaq Leads the Selling as AI Spending Questions Hit Tech

The S&P 500 pulled back from a record high Tuesday and the Nasdaq took the hardest hit. A Wall Street Journal report raising questions about OpenAI’s internal revenue and user growth targets sent chipmakers and AI-linked names sharply lower. The Dow held a small gain. Everything else was under pressure.

June E-mini S&P Forming Reversal Top

June E-mini S&P 500 Index futures are sharply lower shortly after the mid-session on Tuesday. After a record high early in the session, the market turned lower, putting it in a position to post a potentially bearish closing price reversal. This won’t change the trend, but if confirmed on Wednesday, it could trigger the start of a 2 to 3 day correction. The index is also forming a weekly closing price reversal top but that will be more of an issue on Friday.

The minor range is 7079.25 to 7223.25. It is currently testing its pivot at 7151.25. If this is taken out with conviction, the market could plunge into the support cluster formed by the minor bottom at 7079.25 and the short-term Gann angle at 7071.25.

We could see a technical bounce on the first test of this area, but if it fails then look for the move to extend into the intermediate retracement zone at 6995.25 to 6941.25.

AI Spending Questions Doing the Damage

The OpenAI report hit the sector before the session found its footing and it did not recover. The question the market is sitting with is straightforward. If OpenAI is missing its own internal targets on revenue and user growth, how long can the massive spending on data centers and computing infrastructure continue at this pace? That uncertainty spread fast. Nvidia, AMD, and Arm Holdings all dropped sharply. Oracle fell on its cloud exposure. CoreWeave moved lower. The semiconductor index posted its second straight day of losses after a long winning streak and market breadth weakened across both exchanges.

Amazon, Meta, Microsoft, and Alphabet all report this week. I’ve seen what happens when a sector gets hit with a report like this right before earnings. Every number gets read differently. Revenue beats get questioned. Guidance gets picked apart. The AI infrastructure buildout has been the trade for months. If any of those four show cracks in demand this week, Tuesday was not a selloff. It was a preview.

What Else Moved the Market

UPS fell after reporting a drop in profit. General Motors trimmed losses after raising its full-year outlook. Coca-Cola was the standout, gaining after increasing its profit forecast. The Dow held because of names like that. When defensive and industrial stocks are carrying the index on a day tech is getting hit, the market is telling you something about where conviction sits right now.

Spot Brent crude oil is above $110 and the Iran talks are not happening. No meetings scheduled, no progress, no end in sight. Energy prices at this level do not help a market already selling growth names. It is one more thing working against the recovery trade right now.

What to Watch

Amazon, Meta, Microsoft, and Alphabet report Wednesday. Apple follows Thursday. The bar is high after the recent rally and the market is not in a forgiving mood. One strong quarter from that group steadies things. Soft guidance on AI spending from any of them and Tuesday’s selling accelerates. The closing price reversal top on the June E-mini S&P 500 Index futures needs to be confirmed Wednesday. If it does, expect a 2 to 3 day correction from current levels.

More Information in our Economic Calendar.