Global stock markets faced renewed pressure on Thursday, July 16, as artificial intelligence-related chip stocks slumped worldwide. While U.S. indexes remained largely flat, energy concerns spiked as Brent crude rose to $85.43 per barrel amid escalating U.S.-Iran tensions in the Strait of Hormuz, complicating the outlook for interest rates. The Dow Jones Industrial Average was up 81 points, or 0.2% as of 10:30 a.m. Eastern time, while the Nasdaq composite was 0.5% lower.
Global Semiconductor Sell-off and Market Volatility
The artificial intelligence boom, which has driven equity gains throughout the year, faced a sharp correction on Thursday. In South Korea, the Kospi index plummeted 6.4%, driven by heavy losses in AI-linked heavyweights Samsung Electronics and SK Hynix. This volatility follows a period of erratic trading in Seoul, where the market has experienced single-day swings of 8.9%, 7.8%, and 5.3% in the last two weeks. The day before the 6.4% drop, the Kospi had jumped 6.2%.
Stateside, the impact was more measured but signaled growing investor skepticism regarding the sustainability of AI-related valuations if the technology fails to produce the promised profit and productivity. Nvidia, the largest company on Wall Street by value, fell 1.7%, making it the heaviest weight on the S&P 500. Other semiconductor firms saw even steeper declines: Micron Technology dropped 4.1%, shaving its year-to-date gain to 204%. Western Digital fell 5.7%, though it remains up 181% for the year, and Sandisk fell 7.4%, maintaining a 530% gain for the year. The VanEck Semiconductor ETF declined about 2.2%, led by a roughly 4% drop in Arm Holdings.
TSMC Earnings and the AI Demand Signal
Investors are looking to Taiwan Semiconductor Manufacturing Co. (TSMC) for clarity on whether the current market cooling is a temporary correction or a sign of waning long-term demand. Despite reporting a quarterly profit that surpassed analyst expectations, the company’s U.S.-traded shares fell 1.5% on Thursday, while its stock in Taiwan rose 1.2%. Analysts expect the company’s results to provide insight into spending trends among major AI and cloud-computing customers, making the report one of the most important semiconductor earnings releases of the quarter.
Geopolitical Tensions and Energy Market Pressures
Beyond the tech sector, geopolitical friction in West Asia has introduced significant volatility into energy and bond markets following another round of U.S. airstrikes on Iran on Wednesday. The price for a barrel of Brent crude rose another 0.6% to $85.43, nearing a one-month high, as the market reacted to the risk that oil tankers will be unable to use the Strait of Hormuz to carry crude from the Persian Gulf to customers worldwide. Reports that U.S. President Donald Trump had been briefed on options for further military escalation added to investor caution. These concerns pushed the 10-year Treasury yield to 4.58%, up from 4.55% late Wednesday and 3.97% before the conflict began.
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The economic impact of these tensions is forcing a reassessment of central bank policy. The Bank of Korea implemented an interest rate hike—its first since 2023—to keep a lid on inflation, though such moves can slow the economy and hurt investment prices. Analysts are now concerned that the Federal Reserve and other central banks may be forced to raise rates to rein in the effects of expensive oil.
Mixed U.S. Economic Data and Earnings Outlook
The U.S. economic landscape presented a conflicting picture on Thursday. While retail sales for the previous month cooled, internal data suggests that consumer spending remains resilient when ignoring sales at gasoline stations. Additionally, manufacturing activity in the mid-Atlantic region exceeded economist expectations, and a separate report showed fewer U.S. workers applied for unemployment benefits, indicating a solid job market. The S&P 500 remained virtually unchanged, a day after it pulled within 0.5% of its all-time high set last month.
Earnings season provided some relief from the tech-heavy gloom. The Dow Jones Industrial Average benefited from strong results at major healthcare firms; Abbott jumped 11.8% after raising its full-year earnings forecast, and UnitedHealth Group climbed 4.4% after reporting better results than Wall Street expected. These results helped lift Dow futures by about 0.3% or 145 points in premarket trade.
What Traders are Watching Next
The immediate focus for the market shifts to the closing bell, with Netflix earnings expected to influence the communication-services and large-cap tech sectors. Investors are specifically targeting the streaming giant’s subscriber growth, advertising business performance, and revenue guidance to determine if the current tech sell-off will deepen. With the interplay of geopolitical risk in the Strait of Hormuz and the sustainability of AI demand, the market remains in a state of high sensitivity to new data.
