AI stocks lead sell-off as Wall Street whipsaws on Iran threat, rate fears

Artificial-intelligence stocks led a punishing Wall Street sell-off Tuesday as semiconductor shares reversed sharp morning gains and oil prices pared losses after President Donald Trump said Iran had downed a U.S. military helicopter near the Strait of Hormuz, according to The Korea Times.

The turbulence reflects Wall Street's growing anxiety that AI valuations have outpaced earnings — and it arrives as a 10-year Treasury yield of 4.53 percent and climbing oil prices raise the prospect of Federal Reserve rate increases that could weigh further on tech stocks.

The S&P 500 fell 0.9 percent, the Nasdaq composite dropped 1.7 percent and the Dow Jones Industrial Average slipped 82 points, or 0.2 percent, as of 2 p.m. Eastern time Tuesday, The Korea Times reported. The S&P 500 swung between an early gain of roughly 1 percent and a midday loss of about 2.3 percent, a sign of the deep uncertainty gripping traders.

Semiconductor makers bore the sharpest losses. Micron Technology, whose shares had already tripled year-to-date, swung from a gain of 4.2 percent to a loss of 5.1 percent in a single session, according to The Korea Times. Marvell Technology dropped 10.7 percent, Advanced Micro Devices sank 5.9 percent and Nvidia — the S&P 500's largest company by market value — fell 1.6 percent.

Oil amplified investor anxiety. Brent crude had declined 2.9 percent to $91.56 a barrel before Trump said Iran "was responsible for downing an American military helicopter near the Strait of Hormuz" and that the United States "must" respond to the attack, The Korea Times reported. Oil prices pared their losses after his statement, stoking fears that higher energy costs could push inflation higher and force Federal Reserve action.

IPO headlines offered a counterweight. OpenAI filed confidential paperwork for an initial public offering Monday, and SpaceX could announce its own listing later this week, the publication said. Despite the broad index decline, more S&P 500 components rose than fell on the day.

Elsewhere, J.M. Smucker surged 9.4 percent after an earnings beat, and Nuvalent soared 39.1 percent after drug maker GSK agreed to acquire it for $10.6 billion. South Korea's Kospi jumped 8.2 percent — nearly recovering from Monday's 8.3 percent plunge — a rebound closely watched by Korean-American investors, according to The Korea Times.

Traders now price in at least one Federal Reserve rate increase by year-end. The average long-term U.S. mortgage rate climbed to a nine-month high Tuesday, adding further pressure on rate-sensitive sectors across the economy.