US Stocks Slide as Fed Holds Rates, AI Chip Selloff Deepens and Oil Prices Surge

U.S. stocks ended sharply lower on Wednesday as investors reacted to a prolonged selloff in semiconductor stocks and a sharp rebound in oil prices, while awaiting earnings from Microsoft and Meta Platforms for fresh direction on the artificial intelligence sector.

The S&P 500 dropped 1.5% to 7,321.63, the Nasdaq Composite declined 1.7% to 24,442.94, and the Dow Jones Industrial Average fell 2.2% to 51,594.86. Markets initially trimmed losses after the Federal Reserve kept its benchmark interest rate unchanged at 3.50%–3.75%, easing concerns about an immediate rate hike. However, sentiment weakened after three Fed policymakers voted in favor of raising rates by 25 basis points, highlighting growing divisions over inflation.

Fed Chair Kevin Warsh described the policy debate as a “good family fight,” emphasizing that inflation, geopolitical shocks, and rising Treasury yields played a central role in the committee’s discussions. Warsh also noted that higher Treasury yields have already tightened financial conditions, reducing the need for immediate policy action.

Technology shares remained under pressure as the Philadelphia Semiconductor Index recorded its fifth consecutive daily decline, its longest losing streak since December. Investor concerns intensified following reports that Nvidia is discussing participation in a massive OpenAI-related data center project, fueling questions about AI spending sustainability. Increased competition from Chinese AI companies and chipmakers also weighed on sentiment.

Adding to the pressure, SK Hynix posted strong quarterly earnings but failed to exceed elevated investor expectations, sending its shares sharply lower and dragging South Korea’s broader market down.

Investors are now focused on earnings from Microsoft and Meta, whose AI infrastructure spending will be closely scrutinized for clues about the outlook for the sector.

Meanwhile, oil prices surged roughly 7% after the U.S. military said it intercepted a surprise Iranian missile attack targeting American forces in the Middle East. President Donald Trump pledged a forceful response, while U.S. and Saudi forces also carried out strikes against Iran-backed groups in Iraq. The jump in crude prices renewed inflation concerns and added further pressure to equity markets.