Has the AI Rally Ended? Nasdaq Shaken by Rising Oil Prices and Trade Deficit

On the 7th (local time), the New York stock market closed lower, weighed down by sharp declines in AI and semiconductor shares and a surge in oil prices. The S&P 500 fell 0.4% to 7,503.85, the Nasdaq dropped 1.2%, and the Dow Jones Industrial Average slipped 0.2%.

The sell-off began in Seoul. Samsung Electronics, despite forecasting record quarterly profits, failed to exceed already priced-in expectations, sending its stock down more than 6% and triggering profit-taking across global semiconductor names. In the U.S., key AI, memory and equipment stocks each gave back roughly 5%, renewing valuation concerns around growth shares.

Geopolitical tensions in the Strait of Hormuz also weighed on risk assets after reports that an LNG carrier and an oil tanker were struck and that the U.S. launched retaliatory airstrikes targeting Iran. West Texas Intermediate crude jumped nearly 2%, reclaiming the $70-per-barrel level, while the yield on the 10-year U.S. Treasury rose to the low 4.5% range, stoking fresh energy-driven inflation fears.

On the same day, May’s U.S. trade deficit widened sharply from the prior month to its largest level in over a year, adding to concerns of slowing second-quarter growth. New York Fed President John Williams noted, “Inflation remains elevated, but declining energy prices should help ease it going forward,” reinforcing expectations that the Federal Reserve will hold rates steady at this month’s meeting while maintaining a hawkish stance.

Despite broad index weakness, most S&P 500 constituents advanced, signaling a “quality rotation” as capital shifted into energy, software and consumer staples rather than exiting the market. In the near term, overvalued AI and semiconductor stocks, Middle East risk and deteriorating trade data are likely to drive volatility. Investors should, however, focus on the Fed minutes due July 8 and the second-quarter earnings season kicking off in mid-July, as these will be key factors in determining the market’s next direction.