US midday market brief: S&P falters, Dow slips 145 points amid AI pressure

The S&P 500 turned negative on Monday as selling in major artificial intelligence names weighed on the broader market.

The index edged down roughly 0.3% in midday trading, while the Dow fell about 145 points and the Nasdaq slipped 0.5%.

The pullback extends the technology sector's struggles from last week, when Broadcom's disappointing guidance and Oracle's clouded outlook sparked a rotation away from AI-linked equities.​

US stocks turn red: AI casualties drag on equities

After an early rally that pushed futures higher by 0.4% at the open, investors rotated back into caution as the week's first trading session unfolded.

Breadth deteriorated throughout the morning, with decliners outpacing advancers as technology shares bore the brunt of selling pressure.

The semiconductor sector, which has benefited most from AI infrastructure buildouts, proved particularly vulnerable.

Broadcom slipped lower despite Friday's devastating 11% selloff, while Oracle struggled to recover from its two-day rout that erased roughly 16% from the stock's value.​

Trading volumes remained elevated, a sign that both institutional and retail holders were rebalancing positions after last week's rapid repricing of AI risk.

The VIX held steady near 16, reflecting elevated but not panic-level anxiety about near-term market direction. ​

The intraday move represents a continuation of last week's theme: investors are questioning whether the explosive rally in AI infrastructure stocks was warranted given execution risks, capital intensity, and uncertain near-term returns on spending.​

Why AI sellers are in control

Broadcom's collapse planted the seeds for Monday's weakness.

CEO Hock Tan's guidance that custom AI chip revenue would rise substantially but warned of margin compression due to upfront manufacturing costs spooked investors still nursing losses from the tech selloff.

The company's $73 billion AI backlog, while impressive, may not be enough to offset concerns that profitability will lag behind the magnitude of revenue growth.​

Oracle's situation proved more dire. The company's stock has tumbled by more than 40% from its September peak after disappointing investors with both earnings and forward guidance.

A Bloomberg report, later disputed by Oracle, suggested OpenAI data center buildout delays until 2028 sent shockwaves through the hyperscaler supply chain trade.

Nvidia, AMD, and other semiconductor peers all faced selling pressure as investors demanded proof that AI spending would deliver tangible returns rather than simply inflating capex budgets.​

Analysts pointed to stretched valuations as a primary culprit.

Companies like Palantir command price-to-earnings multiples exceeding 400, while AMD and Broadcom trade north of 100 times earnings, far above the S&P 500's historical average of 18.

That leaves little room for disappointment.​

The week ahead carries significant risk potential. Critical inflation data arrives Thursday alongside Fed commentary, while delayed labor reports hit Tuesday.

Investors remain vigilant for any signal that the Federal Reserve might recalibrate its rate-cutting plans, which would further compress multiples for already-expensive growth stocks.