Wall Street Slips off Highs as AI Doubts and Oil Surge Rattle Tech Stocks

CNBC, the Wall Street Journal, AP contributed to this report.

Stocks took a breather Tuesday after flirting with record territory, and the mood shift came fast. What had been a steady climb suddenly looked shaky as doubts around OpenAI and another jump in oil prices hit some of the market’s biggest names.

The S&P 500 slid 0.6%, pulling back from its latest all-time high. The tech-heavy Nasdaq Composite dropped harder, down 1.1%, as AI-linked stocks took the brunt of the selling. Meanwhile, the Dow Jones Industrial Average barely moved, helped by a surge in Coca-Cola shares after stronger-than-expected earnings.

The spark came from a report suggesting OpenAI isn’t growing as quickly as it hoped. Revenue and user gains reportedly missed internal targets, and there are concerns about whether the company can keep up with the massive costs tied to computing and data centers. That uncertainty rippled across the AI trade, which has been one of Wall Street’s hottest bets.

Chipmakers felt it immediately. Nvidia dropped more than 3%, while Broadcom fell even further. Advanced Micro Devices and Intel were each down around 4%, and Oracle wasn’t spared either. Even the broader VanEck Semiconductor ETF sank more than 3%.

There’s a timing element here too. Investors are heading into one of the busiest weeks of earnings season, with several of the so-called “Magnificent Seven” about to report. Alphabet, Amazon, Meta Platforms and Microsoft are all due Wednesday, with Apple following on Thursday. That’s a lot of potential market-moving news packed into a few days.

Some of Tuesday’s selling looked like classic caution. After a strong run to record highs just a day earlier, traders appeared quick to lock in gains rather than risk getting caught off guard by earnings surprises or more negative headlines.

At the same time, oil isn’t helping the mood. Prices climbed again as tensions around the Iran conflict continue to cloud the outlook. West Texas Intermediate crude jumped roughly 3%, pushing above $99 a barrel, while Brent crude rose past $110. The ongoing uncertainty over the Strait of Hormuz – a critical shipping route – is keeping markets on edge.

Geopolitics is still hanging over everything. Over the weekend, President Donald Trump canceled plans to send envoys for ceasefire talks with Iran, signaling negotiations aren’t moving forward anytime soon. Iran has floated proposals to reopen the Strait of Hormuz if the US lifts its blockade, but there’s little sign of a breakthrough.

Higher oil prices are feeding into broader worries about inflation and economic pressure, which in turn complicates the outlook for interest rates. The Federal Reserve is set to announce its latest decision Wednesday, and expectations are firmly set on no change. Still, expensive energy makes that balancing act trickier.

Not everything was red on Tuesday. Coca-Cola jumped more than 5% after delivering solid results, giving the Dow a bit of support. And JetBlue Airways managed to rise despite posting a wider-than-expected loss, helped by signs of improving travel demand and efforts to control fuel costs.

Still, the bigger picture feels less certain than it did just 24 hours earlier. The AI trade, which has powered much of the market’s rally, suddenly looks more fragile if spending slows or expectations prove too optimistic. Add in rising oil and geopolitical tension, and the path forward starts to look bumpier.

For now, Wall Street is in wait-and-see mode. Earnings will do a lot of the talking over the next few days. Whether the recent pullback turns into something bigger – or just a pause before another push higher – likely depends on what those results reveal.