The AI selloff has intensified into a broader market correction, with Nasdaq Composite experiencing a 2.86% plunge and the iShares Semiconductor ETF declining 8.24% in the latest session. This represents the third episode of selling over the past two weeks that has progressively weakened market sentiment. US major indices experienced continued declines last week, with the Dow Jones Industrial Average falling 0.85% to close at 51,775.17, indicating the resumption of the downtrend. According to reports from The Hindu BusinessLine, the S&P 500 dropped 0.57% to 7,580.07, while the NASDAQ Composite declined 2% to 25,437. Friday's selloff was particularly severe, reflecting growing doubts about how quickly AI investments will translate into positive cash flow. Intel shares dropped approximately 28.6% following disappointing results and a weak outlook, while AMD declined 10.9% and Nvidia lost 4.2%. The Philadelphia Semiconductor Index fell 7.2%, highlighting the broad-based weakness across AI-related sectors.
The AI selloff is no longer confined to equity valuations, as concerns about the financial returns from massive AI infrastructure spending are beginning to extend into corporate credit assessments. This deterioration is becoming visible across asset classes, with Treasury yields falling sharply as markets scale back expectations for Fed tightening. The US 10-Year Treasury Yield fell for the fourth consecutive week to 4.93%, failing to get strong follow-through above 5%, and touched a high of 5.05% before declining. Wall Street's outlook now depends on three competing scenarios, with Morgan Stanley's potential support range providing a reference point for further short-term weakness. The problem extends beyond insufficient demand for AI services, as investors are questioning whether the industry's expected revenue growth will arrive quickly enough to justify the scale of infrastructure investment.
The Dow Jones has failed to sustain its initial rise, showing the absence of strong follow-through buying. As reported by The Hindu BusinessLine, key resistances are positioned at 51,960 and 52,350, with the index currently trading below these levels. The bias remains negative, and the Dow Jones can fall to the 51,000-50,800 range in the short term. A break below 50,800 could increase selling pressure, potentially dragging the index down to 50,600 or even 49,800 in the medium term. The S&P 500's break below 7,600 has occurred as expected, maintaining the overall bearish view according to The Hindu BusinessLine. The 7,600-7,620 region will now act as resistance, capping any potential upside movement. However, the S&P 500 has not suffered the same technical breakdown as Nasdaq, with the Dollar holding within its bullish consolidation.
The AI selloff has created a clear divergence in market performance, with energy and defensive stocks demonstrating relative resilience. ExxonMobil gained approximately 2.2% and Chevron advanced 2.8% after reporting stronger profits supported by elevated refining margins. This divergence points to a rotation in investor preferences rather than a uniform withdrawal from the entire US equity market. The broader market weakness is evident across asset classes, with Gold, Silver and cryptocurrencies coming under renewed selling pressure as investors reassess risk appetite. The deterioration is becoming visible across asset classes, suggesting that concerns about AI infrastructure spending are beginning to impact broader market sentiment and investment decisions.
