US stocks closed lower on Tuesday, retreating from record highs as concerns over the sustainability of the artificial intelligence boom and rising oil prices weighed on investor sentiment.
The S&P 500 fell 0.49% to close at 7,138.80, while the Nasdaq Composite dropped 0.9% to 24,663.80.
The Dow Jones Industrial Average edged down 25.86 points, or 0.05%, to 49,141.93, with losses limited by gains in select non-tech stocks.
OpenAI concerns hit tech, chip stocks
Investor sentiment toward technology stocks weakened after a report indicated that OpenAI missed internal targets for revenue and user growth.
According to the report, CFO Sarah Friar warned leadership that the company may struggle to meet future computing contract obligations if revenue growth does not accelerate.
The developments weighed heavily on semiconductor stocks, which have been key beneficiaries of the AI-driven rally.
The VanEck Semiconductor ETF dropped nearly 3%, while Nvidia fell more than 1%. Broadcom declined over 4%, and Advanced Micro Devices lost about 3%.
Oracle also declined, amid scrutiny over its reliance on OpenAI for cloud-related growth.
Market participants are now focused on upcoming earnings from major technology firms, with Alphabet, Amazon, Meta Platforms, and Microsoft set to report on Wednesday, followed by Apple on Thursday.
Oil surge, geopolitical tensions weigh on sentiment
Rising oil prices added to market pressure, as geopolitical tensions involving the US and Iran showed little sign of easing.
West Texas Intermediate crude rose more than 3% to settle at $99.93 per barrel, while Brent crude gained 2.8% to $111.26.
The gains came after reports that President Donald Trump was dissatisfied with Iran’s proposal to reopen the Strait of Hormuz, dampening hopes for a near-term resolution to the conflict.
The United Arab Emirates’ decision to withdraw from OPEC added further uncertainty to global energy markets.
The Strait of Hormuz remains a critical global shipping route, carrying roughly one-fifth of the world’s oil and liquefied natural gas, with disruptions affecting about 20 million barrels per day.
Investors are also monitoring the Federal Reserve, which is widely expected to keep interest rates unchanged.
However, policymakers’ commentary will be closely watched for signals on how elevated energy prices could influence inflation.
Earnings in focus as markets pull back
The market pullback comes after both the S&P 500 and Nasdaq hit record highs on Monday, with investors now reassessing valuations ahead of a critical earnings week.
The companies reporting this week account for roughly 44% of the S&P 500’s total market capitalization, underscoring the importance of their results for broader market direction.
Outside of technology, individual stock moves were mixed.
The Coca-Cola Company rose more than 3% after reporting better-than-expected earnings and raising its annual outlook.
In contrast, United Parcel Service declined after reiterating its full-year revenue target amid rising fuel costs.
General Motors gained after beating profit estimates and raising its full-year forecast, supported by a resilient US car market.
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