US futures slide as Korean chip sell-off and AI financing fears weigh on markets
Investors brace for Federal Reserve policy decision and a wave of corporate earnings as concerns over circular financing and Chinese competition overshadow geopolitical easing.
US stock futures declined on Tuesday morning, with the Nasdaq-100 dropping 0.9% and the S&P 500 falling 0.2%, driven by a sharp sell-off in South Korean memory chipmakers and growing concerns over artificial intelligence circular financing. While the Dow Jones Industrial Average futures edged slightly higher by 0.1%, the broader market sentiment was dominated by losses in the technology sector and uncertainty surrounding the Federal Reserve’s upcoming policy meeting.
South Korea’s Kospi index tumbled more than 10% as shares in major semiconductor manufacturers SK Hynix and Samsung Electronics plunged. SK Hynix fell over 14% and Samsung Electronics dropped more than 13%, reflecting a deepening retreat by investors from AI-related stocks. The sell-off in these bellwether companies has underscored sustained caution within the technology sector, with traders closely watching SK Hynix’s earnings report due around 8 p.m. ET for further insight into the memory trade.
Market sentiment was further soured by reports that Nvidia is exploring a $250 billion funding backstop for OpenAI. This potential deal, which would further intertwine the two companies, has heightened worries about circular financing and the sustainability of the AI boom. Investors are also nervous that Chinese competition is narrowing the AI gap with US firms, undermining prospects for a significant financial payoff from the current technology surge.
Geopolitical developments provided some offset to the tech sell-off, with oil prices retreating following diplomatic talks between the US and Iran. President Trump stated that the two sides were in negotiations after halting active fighting, noting that a positive outcome would be beneficial. However, this easing of tensions was not enough to counteract the broader market anxiety surrounding the AI sector and monetary policy.
The Federal Reserve begins its two-day policy meeting on Tuesday, with traders expecting interest rates to hold steady. While the consensus leans toward a pause, there is limited conviction, and a rate hike remains a possibility. The market is also bracing for a wave of corporate earnings, including reports from Visa, Coca-Cola, Boeing, Ford, and PayPal, alongside an update on consumer confidence at 10 a.m. ET.
