Media365
Just weeks after hitting fresh records, Wall Street’s technology rally is showing signs of fatigue. US stocks fell sharply after the Federal Reserve kept interest rates unchanged, while relentless selling in AI-linked companies dragged the Nasdaq 100 index 11 per cent below its June all-time high.
The broad-based selloff came despite the Fed’s widely expected decision to leave its benchmark interest rate unchanged at 3.50-3.75 per cent. Instead, investors focused on growing concerns over massive AI spending, persistent inflation and the possibility that the US central bank may still resume raising rates later this year.
The S&P 500 fell 1.52 per cent to 7,316.15, its lowest close in a month. The Nasdaq Composite lost 1.74 per cent to 24,442.94, while the Dow Jones Industrial Average declined 2.19 per cent to 51,594.14. The Nasdaq 100 dropped 2.1 per cent during the session, extending its decline into correction territory after falling more than 10 per cent from its June peak.
Fed pause fails to reassure markets
While investors had largely priced in a rate hold, the Fed’s decision exposed growing divisions among policymakers. Three of the 12 members of the Federal Open Market Committee voted in favour of a quarter-percentage-point rate hike, highlighting continued concerns over inflation, which has remained above the central bank’s target for more than five years.
AI stocks remain under pressure
Technology shares led the decline as investors questioned whether the billions being invested in artificial intelligence would translate into near-term returns.
AI-related chip stocks weakened further after South Korea’s SK Hynix reported quarterly profit that, despite rising sixfold from a year earlier, fell short of lofty investor expectations. AI infrastructure company Vertiv slumped 17 per cent after missing revenue estimates.
After the closing bell, Meta Platforms fell 4 per cent in extended trading after raising the lower end of its 2026 capital expenditure forecast to between $130 billion and $145 billion. Microsoft, meanwhile, rose 0.6 per cent after reporting stronger-than-expected cloud revenue growth, suggesting its heavy AI investments are beginning to pay off.
Earnings remain supportive
Despite the recent pullback, analysts still expect S&P 500 companies to post nearly 40 per cent growth in second-quarter earnings from a year earlier, according to LSEG I/B/E/S, with AI-related firms driving much of that increase.
Among individual stocks, Ford Motor gained 2.1 per cent after raising its annual profit outlook, while Visa rose 0.6 per cent after beating quarterly earnings estimates. Lennox, however, plunged 21 per cent after cutting its full-year profit forecast.
The latest selloff underscores growing investor caution as markets weigh elevated AI spending, persistent inflation and the Federal Reserve’s next policy move, even as the corporate earnings season continues to deliver broadly strong results.
