U.S. equities split sharply along sector lines on Tuesday as a widening selloff in semiconductor and artificial-intelligence names dragged the Nasdaq lower even while blue-chip industrials pushed the Dow into the green. The Dow Jones Industrial Average climbed 0.93%, the S&P 500 edged up 0.13%, and the Nasdaq Composite dropped 0.63%, according to TheStreet's market coverage of the July 28, 2026 session.
The move set a jittery backdrop for the Federal Reserve, which convenes for the first day of its two-day policy meeting on Tuesday and will announce its rate decision at 2:00 p.m. ET Wednesday, followed by Chair Kevin Warsh's press conference at 2:30 p.m.
Chipmakers Take the Brunt
Losses in the semiconductor complex were severe and global. Nvidia fell about 4.9% intraday, AMD dropped roughly 8.3%, Micron slid 2.3%, and SanDisk plunged 11%, per TheStreet and Yahoo Finance. Overseas, South Korea's SK Hynix plunged nearly 15%, its steepest one-day drop in years, according to CNBC. The VanEck Semiconductor ETF (SMH) sank 4.06%, extending its one-month decline to 9.33%.
Bloomberg reported that Japanese and Korean equities tumbled overnight as "concerns over Nvidia Corp.'s blockbuster AI supply deal and intensifying competition from Chinese chipmakers weighed on investor sentiment." A report circulating through Asian trading desks claimed a mainland Chinese firm had cracked an advanced lithography step Western manufacturers believed they still controlled — a development that, if confirmed, would compress the moat U.S. chip designers have built around leading-edge nodes.
Circular AI Financing Under Scrutiny
Beyond the China angle, traders pointed to growing unease about the plumbing of the AI capex boom. Investors are increasingly worried that circular financing arrangements — where hyperscalers commit spending to chipmakers who in turn invest in AI startups that lease compute back from those same hyperscalers — could unravel quickly if any one leg pulls back.
Not everyone sees a structural break. Analysts speaking to ABC News attributed much of the move to "profit-taking, when traders sell off some of their shares to lock in returns after a prolonged run-up in price." CNBC's Jim Cramer struck a more cautious tone, warning that "monstrous sellers" were behind the semiconductor slide and that the pressure was unlikely to reverse in a single session.
Fed Meeting Adds Another Layer
The chip drawdown lands on the eve of a Fed decision that is expected — but not universally — to hold rates steady. Economists polled by FactSet expect the Federal Open Market Committee to leave the target range at 3.5% to 3.75%, which would mark the fifth consecutive meeting without a change, according to CBS News.
That baseline is not unanimous. At the June meeting, the FOMC flagged that inflation "remained elevated relative to its 2% goal," and resurgent energy prices have pushed some forecasters to pencil in a hike before year-end. Kiplinger's live coverage of the meeting notes that the split within the committee, along with Chair Warsh's still-evolving communication style, has kept two-way risk elevated into Wednesday's statement.
What to Watch
For Wednesday, the market will be watching three things: any change to the FOMC's inflation language, the tone of Warsh's press conference, and whether the semiconductor selloff finds a floor or accelerates into the close. With the Dow and Nasdaq now moving in opposite directions on the same tape, positioning heading into the decision looks anything but consensus.
Sources: CNBC, Bloomberg, TheStreet, Yahoo Finance, ABC News, Kiplinger, CBS News, FactSet