U.S. stocks fell on Tuesday as a sharp rally in semiconductor shares lost steam and investors grew cautious ahead of a major SpaceX initial public offering. The S&P 500 declined 1.3%, the Nasdaq Composite dropped 2.1%, and the Dow Jones Industrial Average fell 279 points, or 0.6%. The pullback followed a volatile stretch for chipmakers, which had surged on Monday after a steep sell-off late last week.
The iShares Semiconductor ETF sank 5% after rebounding 6% a day earlier. It had fallen 10% on Friday, its worst session in six years, as investors worried that the artificial intelligence-driven boom in chips had run too far, too fast. Micron Technology lost more than 6% after Monday’s recovery, following a drop of about 20% over two trading days last week. Broadcom also reversed lower, falling nearly 5% after a brief bounce.
Market sentiment was mixed as oil prices retreated on hopes of a possible easing in Middle East tensions. West Texas Intermediate crude futures fell 5% to around $86 a barrel, slipping below the $90 level. The move followed comments from U.S. Energy Secretary Chris Wright, who said traffic through the Strait of Hormuz was rising meaningfully, and President Donald Trump’s suggestion that a deal with Iran could be reached within days and reopen the strategic waterway immediately.
The decline in oil helped support parts of the broader market. Energy stocks fell nearly 2%, but lower crude prices lifted interest in sectors that benefit from reduced input costs. Materials and consumer discretionary stocks led gains within the S&P 500, while real estate also advanced after existing home sales came in stronger than expected.
Geopolitical developments continued to influence trading. Iran halted military strikes against Israel on Monday, but warned it could resume attacks if Israeli forces continue operations in Lebanon, according to Iran’s foreign ministry. Israeli Prime Minister Benjamin Netanyahu later said the conflict with Iran and Hezbollah was not yet over, keeping investors focused on the risk of renewed instability in the region.
Technology-related enthusiasm remained high despite the latest market wobble. OpenAI filed confidentially for an initial public offering late Monday, adding to investor interest in artificial intelligence names. At the same time, SpaceX is expected to debut on Friday in what would be the largest IPO ever, with some market participants seeing the listing as additional fuel for the AI and space technology trade. Others, however, worry that the enormous $1.75 trillion valuation could signal that the rally has become stretched.
Overall, Tuesday’s trading reflected a market caught between falling energy prices, lingering geopolitical uncertainty, and renewed scrutiny of the booming AI chip sector. After weeks of strong gains, investors appeared more selective, rotating away from the most crowded winners and reassessing whether the latest enthusiasm for semiconductors and artificial intelligence can continue at its recent pace.
