Nasdaq Futures Plunge as Chip Selloff Rages On, FOMC Meeting and Earnings on Tap

September Nasdaq 100 E-Mini futures (NQU26) are down -1.07% this morning as investors continued to ditch chipmakers amid concerns over the sustainability of the AI spending boom.

A selloff in chip stocks broadened on Tuesday, sending South Korea’s Kospi index down more than -10% and Japan’s Nikkei Stock Average down about -4%. That followed a rough session for U.S. chip and AI infrastructure stocks, with the selloff poised to continue today as Sandisk, Micron Technology, and others slumped in pre-market trading. A blockbuster debut by Chinese memory chipmaker CXMT and a report from The Information that a Chinese state-backed company had begun mass-producing immersion deep-ultraviolet lithography machines for chipmaking fueled fears of intensifying competition. At the same time, Nvidia’s $750 billion in AI infrastructure deals renewed concerns about circular financing in the sector. All that raised further questions about whether hundreds of billions of dollars being spent on AI development would generate sufficient returns at a time when a massive slate of tech earnings is approaching.

Meanwhile, WTI crude prices dropped more than -2% on Tuesday, extending their decline for a third consecutive day as the U.S. and Iran held their pause in hostilities. Attention will now shift to talks between Tehran and Oman on reopening the Strait of Hormuz.

Investors are also awaiting the start of the Federal Reserve’s two-day policy meeting as well as a fresh batch of U.S. economic data and corporate earnings reports.

In yesterday’s trading session, Wall Street’s main stock indexes closed mixed. Software stocks rallied, with Atlassian (TEAM) surging over +10%, and Workday (WDAY) climbing more than +9% to lead gainers in the S&P 500. Also, airlines and other travel stocks advanced amid a slump in oil prices, with American Airlines Group (AAL) and Norwegian Cruise Line Holdings (NCLH) gaining over +3%. In addition, Forte Biosciences (FBRX) jumped over +39% after Argenx agreed to acquire the company for $77 per share in cash. On the bearish side, chip and AI infrastructure stocks sank amid concerns over circular AI financing and rising competition from China, with Sandisk (SNDK) tumbling over -11% to lead losers in the S&P 500 and Nasdaq 100 and Advanced Micro Devices (AMD) sliding more than -5%.

Economic data released on Monday showed that U.S. durable goods orders rose +0.3% m/m in June, weaker than expectations of +1.6% m/m, and core durable goods orders, which exclude transportation, rose +0.6% m/m, weaker than expectations of +0.9% m/m.

“This is another strong report. The headline was held back a bit by falls in the volatile autos and defense aircraft components. But underlying orders look solid,” said Oliver Allen at Pantheon Macroeconomics.

The Federal Reserve kicks off its two-day meeting later in the day. The central bank is widely expected to keep the Fed funds rate unchanged in a range of 3.50% to 3.75% on Wednesday. Employment conditions remain solid, the economy is healthy, and the latest inflation reports came in much cooler than expected, supporting the case for the Fed to stay on hold. However, price risks have rebounded this month, driven by renewed Middle East tensions that pushed oil prices sharply higher, an AI-fueled demand boom, and new U.S. tariffs. Against this backdrop, Fed watchers expect a “hawkish hold,” with potentially two to four officials dissenting in favor of a rate hike. U.S. rate futures have priced in a 79.4% chance of a 25 basis point rate hike at the September FOMC meeting.

Meanwhile, President Trump on Monday urged the Fed to cut interest rates, saying the U.S. should have the lowest interest rate in the world. “Rates should be lowered... We have other countries that are paying less interest rates. We should have the lowest interest rate in the world,” Trump told reporters aboard Air Force One.

Second-quarter corporate earnings season is in full swing, with investors looking ahead to fresh reports from prominent companies today, including Visa (V), Coca-Cola (KO), KLA Corp. (KLAC), Seagate Technology Holdings (STX), Boeing (BA), Corning (GLW), and United Parcel Service (UPS). According to Bloomberg Intelligence, companies in the S&P 500 are expected to post an average +26% jump in quarterly earnings for Q2 compared to the previous year.

On the economic data front, investors will focus on the U.S. Conference Board’s Consumer Confidence Index, which is set to be released in a couple of hours. Economists, on average, forecast that the July CB Consumer Confidence index will stand at 92.4, compared to last month’s figure of 91.2.

The U.S. S&P/CS HPI Composite - 20 n.s.a. will also be released today. Economists expect the May figure to pick up to +1.3% y/y from +1.1% y/y in April.

The U.S. Richmond Fed Manufacturing Index will be reported today. Economists foresee this figure coming in at 7 in July, compared to the previous value of 4.

U.S. Wholesale Inventories data will be released today as well. Economists forecast the preliminary June figure to rise +0.4% m/m after the +0.1% m/m gain a month earlier.

In the bond market, the yield on the benchmark 10-year U.S. Treasury note is at 4.62%, down -0.77%.

The Euro Stoxx 50 Index is up +0.37% this morning, supported by gains in consumer-focused stocks. Consumer stocks outperformed on Tuesday, led by a more than +6% jump in Unilever Plc (ULVR.LN) after the consumer-goods giant posted stronger-than-expected Q2 sales growth and raised its full-year guidance. Also, luxury stocks advanced as the sector got a boost after LVMH posted a 3% increase in quarterly sales, though LVMH shares slipped more than -1%. At the same time, energy stocks slid as oil prices fell for a third consecutive day. In addition, technology stocks edged lower, with ASML Holding N.V. (ASML.NA) extending its recent decline amid the emergence of a potential Chinese state-backed rival. Meanwhile, France’s INSEE statistics agency said on Tuesday that household confidence improved in July as consumers grew less pessimistic about both their past financial situation and their financial outlook. Investors are looking ahead to monetary policy decisions from the Fed and the Bank of England, a raft of key Eurozone economic data, and U.S. Big Tech earnings later this week. In other corporate news, Royal Philips (PHIA.NA) plunged over -10% after the Dutch medical technology company reported a drop in Q2 order intake.

France’s Consumer Confidence data was released today.

The French July Consumer Confidence stood at 86, stronger than expectations of 85.

Asian stock markets today closed in the red. China’s Shanghai Composite Index (SHCOMP) closed down -1.16%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -3.95%.

China’s Shanghai Composite Index closed lower and hit a 1-week low today, tracking a broader tech-driven selloff across the region. Shares of tech hardware makers tied to the global AI infrastructure buildout sank on Tuesday amid mounting concerns over the AI spending boom. At the same time, shares of companies producing components for chipmaking equipment popped after The Information reported that a Chinese state-backed company had begun mass-producing immersion deep-ultraviolet lithography machines. The news further boosted optimism about China’s technological progress following CXMT Corp.’s strong market debut in Shanghai on Monday. Investor attention now turns to an upcoming meeting of the Politburo, China’s top decision-making body, where policymakers typically review the economy and fine-tune policy to support growth. “This week’s July Politburo meeting should offer some guidance, with disappointing GDP data and persistently weak consumer demand adding to the urgency,” according to Ebury analysts. Market participants also look ahead to China’s official PMIs for July, which will offer fresh insight into business sentiment in the world’s second-largest economy. Economists expect the manufacturing PMI to slip into contraction territory, reflecting a pullback in major commodity prices earlier this month, while growth in the non-manufacturing sector is projected to stall due to adverse summer weather. In corporate news, Laopu Gold plunged over -23% in Hong Kong after the luxury jeweler issued disappointing first-half guidance. 

Japan’s Nikkei 225 Stock Index closed sharply lower and hit a more than 2-month low today as chipmakers came under pressure amid mounting concerns over spending tied to the AI boom. Chip and other AI-related stocks plummeted on Tuesday, tracking overnight losses in their U.S. peers as concerns over circular AI funding and intensifying competition from China soured investor sentiment. Memory chipmaker Kioxia Holdings cratered over -18% as CXMT’s spectacular debut in China fueled concerns about a potential shift in the global memory chip supply chain. Also, chip-equipment makers Nikon Corp. and Tokyo Electron tumbled about -11% after The Information reported that a Chinese state-backed company had begun mass-producing immersion deep-ultraviolet lithography machines. China’s progress in semiconductor manufacturing equipment poses a threat to Japanese suppliers, an area in which the country has long maintained a competitive advantage. In addition, Nvidia’s $750 billion in AI infrastructure deals fueled concerns over artificially inflated demand for AI. “Greed has turned into fear for AI-related semiconductor stocks. Investors are now interpreting every piece of news negatively and using it as an excuse to sell, rather than critically analyzing the true fundamental impact,” said Vey-Sern Ling at Union Bancaire Privee. The chip selloff has raised the stakes ahead of this week’s risk events, including monetary policy decisions from the Federal Reserve, Bank of Japan, and Bank of England, as well as big tech earnings. The Nikkei Volatility Index, which takes into account the implied volatility of Nikkei 225 options, closed up +26.94% to 41.14.

Pre-Market U.S. Stock Movers

Chip and AI infrastructure stocks slumped in pre-market trading, with Sandisk (SNDK) and Micron Technology (MU) sliding over -5%.

Corning (GLW) tumbled more than -15% in pre-market trading after the optical networking company issued below-consensus Q3 core sales guidance.

Coca-Cola (KO) advanced more than +3% in pre-market trading after the company posted upbeat Q2 results and boosted its annual guidance.

Cadence Design Systems (CDNS) gained over +2% in pre-market trading after the chip-design company posted better-than-expected Q2 adjusted EPS and raised its full-year guidance.

Johnson & Johnson (JNJ) rose more than +2% in pre-market trading after agreeing to a $5.5 billion settlement to resolve years of litigation over claims that its talc products caused ovarian cancer.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Tuesday - July 28th

Visa Inc. (V), The Coca-Cola Company (KO), KLA Corporation (KLAC), Seagate Technology Holdings (STX), The Boeing Company (BA), S&P Global (SPGI), Corning (GLW), United Parcel Service (UPS), Waste Management (WM), Illinois Tool Works (ITW), The Sherwin-Williams Company (SHW), Royal Caribbean Cruises (RCL), Mondelez International (MDLZ), American Tower (AMT), Ecolab (ECL), Hilton Worldwide Holdings (HLT), PACCAR (PCAR), NXP Semiconductors (NXPI), Ford Motor Company (F), Carrier Global (CARR), Bloom Energy (BE), Teradyne (TER), PayPal Holdings (PYPL), Nebius Group (NBIS), Ferrovial (FER), Arch Capital Group (ACGL), IQVIA Holdings (IQV), Extra Space Storage (EXR), Centene (CNC), DTE Energy Company (DTE), CenterPoint Energy (CNP), FirstEnergy (FE), Xylem (XYL), PPG Industries (PPG), Hubbell (HUBB), Incyte (INCY), Omnicom Group (OMC), CMS Energy (CMS), Veralto (VLTO), Expand Energy (EXE), Innio (INIO), W. P. Carey (WPC), Textron (TXT), HF Sinclair (DINO), Logitech International (LOGI), TransUnion (TRU), Unum Group (UNM), Invesco (IVZ), Crane Company (CR), BXP, Inc. (BXP), CoStar Group (CSGP), UMB Financial (UMBF), UMB Financial (UMBF.O), Pentair (PNR), Oshkosh (OSK), Manhattan Associates (MANH), Skyworks Solutions (SWKS), Alkermes (ALKS), AXIS Capital Holdings (AXS), Zurn Elkay Water Solutions (ZWS), STAG Industrial (STAG), Qorvo (QRVO), The Hanover Insurance Group (THG), Repligen (RGEN), NOV Inc. (NOV), Axalta Coating Systems (AXTA), Armstrong World Industries (AWI), PJT Partners (PJT), Chemed (CHE), Landstar System (LSTR), Commvault Systems (CVLT), Caesars Entertainment (CZR), Rush Enterprises (RUSHA), Avis Budget Group (CAR), Herc Holdings (HRI), Varonis Systems (VRNS), Rithm Capital (RITM), Kiniksa Pharmaceuticals International (KNSA), Enphase Energy (ENPH), Franklin Electric Co. (FELE), ExlService Holdings (EXLS), Methanex (MEOH), The Cheesecake Factory (CAKE), Asbury Automotive Group (ABG), Polaris (PII), Mirion Technologies (MIR), Renasant (RNST), Greif (GEF.B), Highwoods Properties (HIW), Greif (GEF), Itron (ITRI), Kadant (KAI), Curbline Properties (CURB), Community Financial System (CBU), AllianceBernstein Holding (AB), Artisan Partners Asset Management (APAM), Centerra Gold (CGAU), Seacoast Banking Corporation of Florida (SBCF), Titan America (TTAM), Acadia Realty Trust (AKR), Acadia Healthcare Company (ACHC), Ashland (ASH), Trustmark (TRMK), First Busey (BUSE), Werner Enterprises (WERN), Slide Insurance Holdings (SLDE), Rogers (ROG), Merchants Bancorp (MBIN), First Commonwealth Financial (FCF), JetBlue Airways (JBLU), American Assets Trust (AAT), Hycroft Mining Holding (HYMC), Expro (XPRO), NeoGenomics (NEO), Huron Consulting Group (HURN), CTS Corporation (CTS), O-I Glass (OI), Piedmont Realty Trust (PDM), Nabors Industries (NBR).