Nasdaq futures moved lower on Tuesday as investor attention turned to the financing needs behind surging demand for AI infrastructure, and to intensifying competition out of China that may compress margins for chip makers. Several high-profile semiconductor names fell in premarket trade, signaling renewed skepticism about the sector's near-term trajectory.
In premarket trading, Nvidia dropped 1.1%, Micron tumbled 4.6% and Applied Materials was down 3.5%. U.S.-listed shares of Taiwan Semiconductor Manufacturing Co. slipped 2.6% and Korea’s SK Hynix fell 4%.
Exchange-traded and benchmark measures of the chip industry also showed strain. Roundhill’s Memory ETF declined 6.6% on Tuesday and has traded below its 50-day moving average for the past two weeks, a technical sign of weakening short-term momentum. Meanwhile, the Philadelphia SE Semiconductor Index has retreated more than 20% from the all-time high it reached in June.
Market unease stems in part from questions over how much additional capital firms will need to deploy to build AI capacity. Investors are scrutinizing whether the recent surge in chip valuations is justified by sustainable corporate spending, or if companies will have to divert significant cash toward infrastructure at the expense of other priorities.
Adding to the backdrop, observers note increased competition from China, where cheaper AI models and a growing presence in the semiconductor industry are reshaping the competitive environment. Those dynamics have amplified concerns that pricing and margin pressure could persist for some players.
Investor focus will sharpen later this week when large AI hyperscalers report quarterly results. Amazon.com, Meta, Apple and Microsoft are due to publish earnings, and markets will be watching for evidence that the collective investments — described as totaling several hundred billion dollars — are producing returns. The upcoming reports are also expected to provide additional signals about demand for chips and related AI infrastructure.
Shares of the four U.S. companies were marginally higher in premarket trading on Tuesday. At 04:27 a.m. ET, Dow E-minis were up 100 points, or 0.19%, while S&P 500 E-minis were down 6.5 points, or 0.09%. Nasdaq 100 E-minis were down 194.5 points, or 0.69%.
Policy uncertainty also remained on the radar. The Federal Reserve is set to announce its interest rate decision on Wednesday at the conclusion of its two-day meeting. Traders currently assign a 37.4% probability to a rate hike this week, based on LSEG-compiled data, though market participants remain confident that borrowing costs could rise by at least 25 basis points by the end of the year.
Outside of equities and policy, energy markets offered a measure of relief. Oil prices fell 2.8% to a one-week low as a fragile ceasefire between the United States and Iran held, even as reports surfaced of drone attacks in Saudi Arabia, Jordan and Iraq. U.S. President Donald Trump said the United States was having "good talks" with Iran and suggested there was a chance of a deal to end the conflict.
As investors weigh upcoming corporate results against evolving geopolitical and policy risks, the market's reaction to AI-related capital spending and competition will be a key determinant of near-term performance for the semiconductor sector and adjacent technology industries.