ASX eyes uncertain start, Wall Street hit by AI slump

The global stock markets faced renewed volatility as the artificial intelligence sector, which had driven much of the recent rally, came under sustained selling pressure. On July 20, 2026, the S&P 500 declined by 1 per cent, marking its first losing week in three months and only its third such decline since late March. The index had previously approached its all-time high, narrowly missing it by less than 0.5 per cent. Meanwhile, oil prices surged due to escalating tensions with Iran, adding to the downward pressure on equities. The sell-off primarily targeted chipmakers and other firms central to the AI industry. Major indices saw steep declines, with the Dow Jones Industrial Average falling 406 points—0.8 per cent, and the Nasdaq Composite plunging 1.4 per cent. In Australia, sharemarket futures suggested a modest opening gain of 54 points, or 0.6 per cent, although this forecast was made prior to the U.S. launching additional airstrikes against Iran in response to the killing of American troops. Iran retaliated by firing missiles toward Jordan, raising concerns that the conflict might spread to neighboring regions including Israel. The Australian dollar traded at 69.71 cents against the U.S. dollar. Brent crude, the benchmark for international oil pricing, rose 4.6 per cent to close at $88.10 per barrel, reflecting a sharp increase from approximately $76 per barrel a week earlier. Market participants anticipated further gains in oil prices as Middle Eastern developments continued to influence supply dynamics. These rising costs added to the financial strain on energy-dependent industries and indirectly affected broader equity markets. Among the hardest-hit sectors were technology stocks, particularly those tied to the AI boom. Nvidia, a leading player in the field, lost 2.2 per cent, temporarily relinquishing its position as the most valuable company on Wall Street before regaining it later in the session. Applied Materials dropped 5.6 per cent, reducing its annual gains to 106 per cent. Micron Technology fluctuated significantly, initially declining 5.8 per cent before rebounding slightly to end the day down 0.5 per cent. Earlier in the morning, tech-heavy indices across Asia experienced substantial declines, with the Taiwan Semiconductor Manufacturing Co. plummeting 7.3 per cent. In South Korea, the stock market remained closed for a public holiday, providing a brief reprieve. However, the country's market has been heavily influenced by its dominant tech firms, Samsung Electronics and SK Hynix. Over the course of the previous week, Seoul's Kospi index experienced extreme volatility, with one day seeing a 6.2 per cent rise followed by two days of declines of 6.4 per cent and 8.9 per cent respectively. Further unsettling investors was news of a new AI model developed by the Chinese startup Moonshot, named Kimi K3. This development echoed similar announcements from China’s DeepSeek in early 2025, raising fears that affordable alternatives to Western AI platforms like ChatGPT and OpenAI could undermine demand for specialized hardware and software components. European markets showed relatively muted movements, as they place less emphasis on AI-driven technologies compared to their counterparts in the U.S. and Asia. Nevertheless, the broader economic uncertainty persisted, with several major corporations reporting disappointing results. Netflix shares fell 7.3 per cent after its quarterly revenue missed analyst expectations, despite stronger-than-anticipated profits. The company also revised its summer forecasts downward. Intuitive Surgical, a manufacturer of robotic surgical systems, saw a dramatic drop of 14.1 per cent, despite exceeding earnings expectations. Analysts attributed the sharp decline to concerns over slowing adoption rates due to the expiration of tax incentives that had reduced healthcare costs for patients under the Affordable Care Act. Elon Musk’s SpaceX also suffered, with its stock falling 5.4 per cent and reaching its lowest level since its initial listing on the Nasdaq nearly a month earlier. The firm's performance reflected ongoing challenges in maintaining investor confidence amid shifting market conditions and regulatory scrutiny.