Chip Stocks Suffer as Concern Over AI Spending Grows – US Market Wrap

A sell-off in chipmakers drove down stocks, raising doubts about whether big artificial-intelligence investments will justify premium valuations, as a revival in geopolitical uncertainties weighed on morale.
The meltdown in this year’s best-performing area on Wall Street dragged a barometer of chip giants down 4.3%. TMSC’s excellent outlook failed to impress, as the company increased its spending plan. The Nasdaq 100 dropped 1.6%. Alphabet fell 4.4% as Google was reported to be months behind schedule in producing its most powerful flagship AI model.
Fed’s Schmid expressed his greatest concern about inflation, which he believes will accelerate further in the coming months. Fed’s Logan urged for higher interest rates, stating that inflation does not appear to be returning to the target on a sustained basis.
Traders also analyzed some significant economic reports. Jobless claims declined last week, although retail sales increased little in June, hampered by a drop in gas-station receipts that obscured robust advances at several retailers.
Heightened geopolitical risks also limited risk appetite, with the US increasing strikes against Iran. Oil fell but stayed higher for the week, stoking concerns about future inflationary pressures that could prompt the Federal Reserve to raise interest rates before the end of the year. Bond yields edged higher.