S&P500 and Nasdaq 100: US Stocks Risk Further Selling on AI Spending Doubts

Market Overview - The Dow dropped 228 points, the S&P 500 fell by 1.16%, and the Nasdaq decreased by 1.81%, indicating a defensive market breadth with volume slightly above recent averages, suggesting active selling rather than passive drift [1] AI Sector Performance - The AI trade is showing signs of strain, particularly in megacap tech stocks. Oracle's shares fell by 5.4% following reports that Blue Owl Capital will not support a planned $10 billion data center deal, signaling a shift in market sentiment towards AI investments [2] - Nvidia's stock declined by 3.8% and Broadcom's by 4.5%, contributing to a nearly 4% drop in the chip index. Traders are increasingly questioning the sustainability of balance sheet strain in the sector as AI spending appears to be self-reinforcing, with OpenAI at the center of this dynamic [3] - Amazon's shares slipped by 0.6% amid news of potential talks to invest approximately $10 billion in OpenAI, which may enhance its AI capabilities but also serves as a reminder of rising costs in the sector [4] Trader Sentiment - Traders are currently stepping back from chasing dips, with decliners significantly outpacing advancers, particularly on the Nasdaq. This reflects a reassessment of exposure as year-end approaches, rather than indiscriminate selling [5] - Alphabet's shares fell by 3.2% as reports emerged that Google is collaborating with Meta to compete against Nvidia's software dominance. The market is focusing on execution risks and timelines rather than the long-term potential of this initiative [5]