S&P 500 Flat as AI Skepticism Offsets 6% Plunge in Oil Prices

US equity markets remained largely flat on Monday as a sharp decline in oil prices and geopolitical relief failed to overcome a deepening selloff in the semiconductor sector. The S&P 500 hovered near the flatline, while the Nasdaq Composite dipped as investors questioned whether the massive capital expenditures in artificial intelligence are yielding sufficient near-term returns.

Crude oil prices tumbled more than 6% following a pause in military strikes between the U.S. and Iran, providing a tailwind for consumer-facing sectors and communication services. However, this was negated by a 5% drop in Nvidia Corp. and double-digit losses for memory makers like Sandisk. The cost of protecting Nvidia’s debt against default has notably increased as the company reportedly enters talks with OpenAI to guarantee a staggering $250 billion in financing for new data center infrastructure.

Adding to the sector's woes, ASML Holding NV saw shares sink following reports that Chinese state-backed firms have begun mass-producing homegrown lithography tools, potentially threatening long-term sales in one of the company's largest markets. While the Russell 2000 outperformed with a 0.6% gain, the broader market remains caught in a tug-of-war between improving macroeconomic indicators and 'AI angst.' Since the start of the summer, the volatility has become a new normal as traders grapple with a shift in leadership from tech behemoths to more cyclically sensitive stocks.