US EQUITY OPEN: Nasdaq tumbles as chip and memory stocks slide with the AI trade under pressure

OPEN: Stocks have opened mixed on Tuesday with the S&P 500 little changed, while the Nasdaq 100 and Russell 2000 trade lower and the Dow Jones outperforms. The Dow's strength is being driven by gains in Microsoft (MSFT) and Amgen (AMGN). The Nasdaq is currently on track to enter correction territory - a 10% drop from its peak - with weakness led by chip names, with the Semiconductor ETF (SOXX) down 5.6% and the Memory ETF (DRAM) lower by 10%, tracking a hefty 10% decline in South Korea's KOSPI overnight as the global AI trade remained under heavy pressure. Despite the headline weakness, the equal-weight S&P 500 (RSP) is advancing, highlighting positive underlying breadth. On a sector basis, the vast majority of sectors are in positive territory following a slew of earnings, with Consumer Staples, Health Care and Materials outperforming, while Technology and Industrials—both heavily exposed to the AI theme—lag.

Elsewhere, crude prices continue to slide following the US-Iran de-escalation over the weekend. Reports suggest Oman has presented Iran with a proposal regarding the Strait of Hormuz, while other reports indicate Tehran is showing some flexibility. However, Iranian state media reports that Iran has yet to formally respond.

In FX, the Dollar is little changed. CAD is marginally outperforming despite the decline in oil prices, although it had lagged sharply during Monday's crude-driven sell-off. AUD underperforms as equities weaken, giving back some of Monday's outperformance.

Treasury yields are lower across the curve as oil prices continue to decline, easing inflation concerns ahead of today's 7-year Treasury auction. Attention then turns to Wednesday's FOMC decision, followed by the US GDP and PCE reports on Thursday.

Gold prices are lower despite the decline in Treasury yields and crude, with the precious metal giving back some of Monday's geopolitical-driven gains.

STOCK SPECIFICS:

Cadence Design Systems (CDNS): Profit beat and raised FY outlook
Welltower (WELL): FFO and revenue topped
Johnson & Johnson (JNJ): Agreed to pay USD 5.5bln to settle around 80k remaining ovarian cancer lawsuits involving its talc products
Universal Health Services (UHS): Lowered FY guidance
United Parcel Service (UPS): Strong quarterly metrics and lifted FY revenue view
Centene (CNC): Quarterly results comfortably beat Wall Street expectations
Royal Caribbean Group (RCL): Solid report, but weighed on by cautious commentary regarding the near-term Middle East impact on bookings
Pentair (PNR): To acquire Taco Group Holdings for USD 1.4bln
Coca-Cola (KO): EPS and revenue topped
Sherwin-Williams (SHW): Stellar report and FY guidance
Corning (GLW): Top line missed with disappointing next-quarter outlook
Core Scientific (CORZ): Partners with Advanced Micro Devices to provide up to 2.5GW of AI data centre capacity
Honeywell International (HON): Upgraded at BofA

A cap-weighted index under pressure while the equal-weight measure advances is the classic signature of a concentrated-leadership unwind rather than broad risk aversion: selling sits in the mega-cap and AI-linked names that dominate the index, while the median stock holds up. Past episodes of this kind have tended to hinge on whether the weakness in the leading theme stays rotational, with money moving into staples, health care and defensives as here, or bleeds into the breadth measures, which is what separates a correction in one crowded trade from a genuine drawdown. The transmission from an overnight slide in Asian semiconductor-heavy markets into US chip and memory names is a well-worn pattern, with the global AI supply chain trading as a single position across time zones. The earnings tape is doing the sorting: beats in staples, health care and industrials with real guidance are being rewarded, while disappointments in AI-adjacent hardware are being punished hard, consistent with late-phase scrutiny of monetisation rather than narrative. The macro calendar now dominates the follow-through: falling crude on Gulf de-escalation is feeding lower yields and easing the inflation input into the central bank decision and the growth and price data due later in the week, and the interaction between a softening AI trade and an easier rates impulse is the tell for whether this stays rotational.