New York — Stocks swung in volatile trading Tuesday as investors sold AI-related names, rotated into other sectors and took profits after a strong rally in recent months.
The tech-heavy Nasdaq Composite opened higher before dropping more than 3.6% in a rapid reversal during trading. But investors stepped in to buy the dip, and by the closing bell, the Nasdaq was down only 0.97%.
Similarly, the S&P 500 fell more than 2.2% before dip-buyers stepped in. The S&P ended the day down just 0.26%. The Dow, which has less exposure to tech, gained 86 points, or 0.17%, recouping losses after tumbling about 575 points earlier.
After an extraordinary rally this year, semiconductor chip makers bore the brunt of the selling. Declines in tech and AI stocks, including the chipmakers, weighed on the major indexes.
“It’s not unusual to see a period of consolidation after exceptional performance,” said Bill Northey, senior investment director at US Bank Asset Management.
The fundamentals underpinning the chipmaker rally this year are real, Northey said, but when one sector has such strong performance, it should be expected that there are “bouts of consolidation … as enthusiasm ebbs and flows.”
The Nasdaq and S&P on Friday had their worst day so far this year. Markets rebounded on Monday. But the volatility picked up again on Tuesday, halting the rebound.
A popular index that tracks semiconductor companies dropped almost 2%, paring losses after tumbling more than 8.5% during trading. Nvidia (NVDA), the largest company in the S&P 500 by market value, fell about 0.2%, recouping most losses after dropping more than 4%.
Marvell Technology (MRVL), a chipmaker, sank 7.6%. Broadcom (AVGO) dropped 1.1%, paring losses after falling more than 6.5%. Broadcom is coming off its worst week in a year and a half after its guidance for chip revenue slightly missed expectations.
After rallying 20% in April and another 20% in May, an exchange-traded fund tracking the tech sector is down about 5% this month, reflecting the pullback in AI-related stocks.
The S&P 500 and Nasdaq are weighted by market value, meaning the larger a company by market value, the more influence it has on the indexes’ performance. That means tech and AI stocks often move the market as a whole.
