An electronic scoreboard at the Korea Exchange in Seoul, South Korea
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US stocks whipsawed on Tuesday, with investors shrugging off earlier weakness in chips.
AI sentiment took a hit after a weak market debut from a South Korean neocloud company.
Meanwhile, oil prices dropped after spiking to their highest levels in months.
US stocks were on a roller coaster ride on Tuesday.
After fresh AI jitters rattled chip makers, stocks were in the green by midday, with investors sidestepping new AI jitters caused a grim market debut for a South Korean neocloud company.
The offering from Elice, a cloud infrastructure firm viewed as the country’s biggest Kosdaq index listing of the year, plunged 32% on its first day of trading. It dragged several other prominent South Korean tech stocks down as well, including Samsung and Sk hynix , while the benchmark KOSPI index ended the day down 4%.
The negative sentiment around a company in a critical corner of the AI trade leaked into US markets as trading began, with major chip and memory stocks tumbling.
However, most names had reversed course to trade higher after falling earlier in the session, while major indexes gained.
Here’s where major indexes stood around noon ET:
S&P 500 : 7,724.15, up 0.43%
Dow Jones Industrial Average : 52,469.29, up 0.97% (+503 points)
Nasdaq 100 : 29,593.88, up 0.22%
CoreWeave, the US neocloud stock that was rattled by fears around its debt last week, saw its shares drip as much as 6% before paring the loss to also climb higher. The stock was weighed down by the wider AI hardware weakness, while reports of a bearish note from HSBC that flagged “structural concerns” for neocloud companies deepened the sell-off.
Elsewhere, oil markets were volatile again on Tuesday. Brent oil shot up to $111 per barrel, the highest level in five months, on fears of attacks on shipping and production facilities in Saudi Arabia. A sudden drop around midday helped stocks regain losses, with Brent tumbling to about $108 and US oil falling to $102.70.
Yields were weighed down by a string of weak housing data this week. Data showing tepid housing starts in September came a day after homebuilder sentiment was the lowest in 14 years.
Volatility in South Korean tech woes rippling into US markets has become a familiar theme this year. A a similar sell-off last week was sparked by concerns about prominent South Korean chip firms being threatened by competition from China.
David Morrison, a senior market analyst at TradeNation, noted that this development shows that investors are still highly concerned about AI-adjacent companies, noting that Firmus, an Australian data center group with backing from Nvidia , recently scrapped its plans for a $5 billion IPO.
“A look at the charts of individual stocks within the US chip sector this morning, and indeed AI-adjacent stocks as well, shows that the selloff since the beginning of this month, or indeed from late September in some cases, may not have completed yet,” he stated.
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