S&P 500 falls 0.6% as AI trade unravels, Hormuz fears resurface

The S&P 500 fell 0.6 percent to 7,513.80, while the Nasdaq 100 dropped 1.8 percent to 29,217.20, as investors exited AI positions after Samsung's earnings triggered peak-margin fears and Hormuz disruptions boosted energy stocks.

"The selloff in semis is about valuation exhaustion, not revenue weakness — Samsung beat and still fell 7 percent, which tells you everything about where we are in this cycle," said Steve Grasso, director of institutional sales at Grasso Global, speaking on CNBC.

The Philadelphia Semiconductor Index lost ground for a second week after nearly doubling between late March and late June. Micron Technology slid 6.3 percent, Advanced Micro Devices fell 6.1 percent and Qualcomm dropped 2.1 percent, even as Samsung posted record revenue. Energy stocks gained: Occidental Petroleum rose 5.9 percent and Devon Energy added 5.1 percent, tracking a rebound in crude after renewed Strait of Hormuz disruptions threatened supply routes. The Dow Jones Industrial Average fell 0.4 percent to 52,944.50, and the Russell 2000 declined 1.2 percent to 2,981.69.

The dual shock — AI sector weakness and geopolitical tension in the Middle East — creates a dilemma for portfolio managers heading into the second half. A Bloomberg Markets Live Pulse survey of 221 respondents conducted June 22 through July 2 found 53 percent inclined to rotate into traditional company shares from tech, while 73 percent said they would sell oil and buy equities, suggesting many see the energy rally as temporary.

The Samsung paradox captures the market's tension. The South Korean memory maker reported blowout earnings, yet its stock fell 7 percent, dragging the semiconductor complex lower. Micron's gross margin hit 84.6 percent, up from 37.7 percent a year earlier, on revenue that surged 346 percent. The problem, as Grasso framed it, is that memory follows a commodity-style cycle — investors buy at the trough, not at 80 percent margins near the peak. AMD, which has rallied 300 percent over the past year, now trades at 207 times trailing earnings.

Oil Rallies as Hormuz Disruptions Return to Focus

Brent crude traded near $74 a barrel and West Texas Intermediate near $70, recovering from recent lows, as renewed disruptions in the Strait of Hormuz threatened Middle East export routes. The chokepoint normally handles about 20 percent of global seaborne oil trade. A June truce had allowed partial reopening, but normalization remains slow, with flows still well below pre-war levels. Iran, reliant on the strait for sales mostly to China, has exported more volume at steep discounts — reportedly $8 to $10 below Brent — eroding revenues despite higher volumes. The de-escalation of the U.S.-Iran conflict had taken steam out of bullish oil bets in recent weeks, but Tuesday's move suggests traders are repricing geopolitical risk.

This article is for informational purposes only and does not constitute investment advice.