US stocks broadly declined on Tuesday, with a persistent sell-off in technology shares dragging the Nasdaq Composite to the steepest losses. Investor risk appetite has cooled amid renewed doubts over the outlook for artificial intelligence (AI) infrastructure spending and continued strength in the US dollar. At the time of writing, the S&P 500 was down over 1.2%, the Nasdaq Composite had fallen more than 1.9%, and the Dow Jones Industrial Average edged down 0.04%.
The technology sector was the primary drag on the market. AI-related memory and chip stocks faced pressure, influenced by a sharp correction in South Korean equities. The benchmark KOSPI index fell approximately 10% from its recent record high on Tuesday, marking its largest single-day drop in history and sparking concerns over overheated valuations across the global AI supply chain.
Among Nasdaq components, AI-related stocks such as Micron Technology (MU.US), SanDisk (SNDK.US), Teradyne (TER.US), and Applied Materials (AMAT.US) were among the biggest decliners. David Morrison, Senior Market Analyst at Trade Nation, noted that markets are once again questioning the sustainability of the AI infrastructure investment boom, particularly as some major tech firms plan to fund massive expansion through equity issuance. "The market is reassessing the AI infrastructure spending outlook, especially with some large companies planning to raise capital through equity financing for expansion," Morrison stated. "Whether this presents another 'buy the dip' opportunity or is a precursor to a larger correction remains to be seen."
Concurrently, the US dollar extended its recent gains. The US Dollar Index (DXY), which measures the greenback against a basket of major currencies, rose to 101.33 on Tuesday, its highest level since May 13, 2025. Market participants believe the dollar continues to find support as investors reassess the future path of monetary policy following the Federal Reserve's decision to hold rates steady last week and its hawkish-leaning signals.
On the economic data front, US business activity in June performed better than expected. Data from S&P Global showed the US Composite Purchasing Managers' Index (PMI) for June exceeded market forecasts, indicating continued expansion in economic activity. However, the manufacturing sector did not show uniform strength. Data from the Richmond Fed revealed the Richmond Fed Manufacturing Index for June fell more than anticipated, reflecting ongoing pressure on factory activity in some regions.
In the bond market, Treasury yields edged lower. The yield on the 10-year US Treasury note fell 3 basis points to 4.49%, while the yield on the 2-year note also declined 3 basis points to 4.21%.
Geopolitically, markets continued to monitor progress in US-Iran negotiations. According to media reports, both sides have agreed to seek a formal agreement within the next 60 days, further bolstering expectations for a de-escalation of tensions in the Middle East.
International oil prices continued to retreat on improved supply prospects. New York crude futures fell to around $73 per barrel, while Brent crude prices declined to approximately $77 per barrel.
Analysts point out that with multiple factors at play—including the Fed's policy outlook, valuation adjustments in the AI sector, and shifting geopolitical dynamics—market volatility is likely to persist in the near term. Investors will closely watch upcoming corporate earnings reports and subsequent economic data to gauge whether technology stocks, particularly those in the AI supply chain, can regain favor with investors.