AI Growth Skepticism Drags Tech Indices Ahead of Fed Policy Decision

The Nasdaq Composite and S&P 500 retreated on Tuesday, led by a sharp decline in semiconductor and cloud infrastructure shares. The Nasdaq fell 0.9%, while the S&P 500 dropped approximately 0.5%, reflecting renewed anxiety over the monetization and scalability of artificial intelligence. The downturn was triggered by reports that OpenAI failed to meet internal revenue and weekly user targets. This has raised critical questions regarding the sustainability of the massive capital expenditures currently being poured into data center expansion by the industry's largest players. Oracle shares tumbled 4% following reports of its significant cloud partnership with OpenAI. Other chip giants, including Nvidia, AMD, and Broadcom, also saw sharp declines, while Nvidia-backed CoreWeave slid nearly 6%. Despite the dip, some analysts suggest the long-term outlook for AI infrastructure remains intact. Brian Mulberry of Zacks Investment Management anticipates that upcoming earnings from five Magnificent Seven firms will show stable or increasing capex, as hyperscalers continue to secure necessary compute capacity to maintain a competitive edge. Simultaneously, the market is bracing for the Federal Reserve's policy announcement. With this potentially being Jerome Powell's final meeting as chair, traders are scanning for guidance on inflation and the impact of escalating tensions between the U.S. and Iran on global oil prices.