Stocks hit by AI concerns as oil rises on tanker attack

NEW YORK: Stock markets traded mixed Tuesday as investors tracked concerns over the AI sector’s outlook, while oil prices climbed after two tankers were attacked near the Strait of Hormuz.

Seoul once again led losses in Asian stocks as Samsung’s share price tumbled despite the South Korean chip giant’s eye-watering rise in profit, stoking fears that the record-breaking AI-fuelled rally may have reached the end of the road.

The “ugly reaction to exceptional Samsung earnings is a reminder that, in richly valued markets, meeting expectations is no longer enough”, noted Ipek Ozkardeskaya, senior analyst at Swissquote bank.

Samsung said it expected to post a jump in second-quarter operating profit of more than 1,800% thanks to sustained demand for memory chips seen as essential to help power the world’s thirst for AI.

However, the company’s shares tumbled by as much as 10% at one point before ending with a loss of more than 6%.

Seoul’s Kospi index finished down nearly 5%.

Samsung’s update came at the start of a much-anticipated earnings season that will be closely followed for an idea about firms’ outlooks for AI in light of huge sector investment.

“Strong earnings are no longer enough,” wrote Saxo Markets’ Charu Chanana.

“For AI-linked stocks, the market now wants strong earnings, strong guidance and clear evidence that pricing power can last.”

She added: “Investors are not paying for what has already happened. They are paying for what happens next.”

There were losses also for the tech-heavy Tokyo stock market as well as Hong Kong, Shanghai, Sydney, Taipei and Bangkok.

The tech-heavy Nasdaq Composite shed 0.6% when trading got underway in New York.

“Investors are wondering if SpaceX can improve the mood as it enters the Nasdaq 100 later today,” said David Morrison at Trade Nation.

Its entry will force many passive share funds that track the index to purchase large volumes of stock in the rocket and satellite communications firm, with only a limited volume currently trading.

However, SpaceX shares slid 1.2% as trading got underway.

The S&P 500 dipped while the blue-chip Dow added 0.3%, striking a fresh all-time high.

London and Paris rose, while Frankfurt dropped in afternoon trading in Europe.

Elsewhere, oil prices rose around 1% after British maritime security agency UKMTO said an “unknown projectile” had struck and caused a fire on an oil tanker off the coast of Oman near the Strait of Hormuz on Monday.

The incident occurred near one of the world’s most important energy shipping routes, despite a ceasefire between the US and Iran and efforts to secure a lasting peace agreement.

UKMTO said later that a tanker was hit by an unidentified projectile in the Strait of Hormuz and was believed to have suffered structural damage but no casualties or environmental damage.

Traders were meanwhile awaiting the release of minutes from the Federal Reserve’s most recent policy meeting, hoping for fresh clues about its plans for potential US interest-rate rises as it tries to battle elevated inflation.