By Johann M Cherian and Ragini Mathur
July 28 (Reuters) - The Nasdaq was set to open lower on Tuesday, mirroring a cautious mood across global markets toward AI chip stocks on concerns about hefty corporate spending and rising Chinese competition, ahead of earnings from some of the biggest companies on Wall Street.
Chip majors such as Micron slid 6.4%, Intel shed 4.8% and Applied Materials lost 4.5% in premarket trading, while U.S.-listed shares of Taiwan's TSMC and Korea's SK Hynix fell over 3% each.
Nvidia dipped 0.4%.
Global markets have become increasingly volatile this month as investors scrutinize the need for more corporate spending on AI infrastructure such as semiconductors that underpinned strong gains in chip stocks in the previous quarter.
Roundhill's Memory Exchange Traded Fund lost 7.8% on Tuesday and has been trading below its 50-day moving average for the past two weeks, reflecting weak short-term momentum, while the Philadelphia SE Semiconductor Index has fallen over 20% from its all-time high hit in June.
Signs that Wall Street's biggest companies such as Alphabet and Tesla are running out of cash to fund their ambitions have also made markets nervous, while China showcases cheaper AI models and deepens its presence in the competitive semiconductor industry.
"The market is extremely concerned about the level of spending that's been going on from the hyperscalers. These huge dollar amounts feel irresponsible at this point," Robert Pavlik, senior portfolio manager at Dakota Wealth said.
When AI hyperscalers Amazon.com, Meta, Apple and Microsoft report earnings later this week, investors will be keen to see if their investments, worth over several hundred billion dollars, are yielding returns. The reports are also expected to offer clues on the demand for chips and other AI infrastructure.
Shares of the four U.S. companies were marginally higher on Tuesday.
At 08:36 a.m. ET, Dow E-minis were up 461 points, or 0.88%, and S&P 500 E-minis were up 5.5 points, or 0.07%. Nasdaq 100 E-minis were down 218.5 points, or 0.78%.
Dow component Coca-Cola gained 4% as the beverage company raised its annual revenue and profit forecasts.
Other consumer staples companies such as Walmart and Procter & Gamble also added about 2% each.
Boeing gained 0.6% after the airplane maker generated positive free cash flow as its turnaround plans gained momentum.
The Federal Reserve is due to announce its interest-rate decision on Wednesday. Traders see a 37% chance of a rate hike this week, according to LSEG data, and expect borrowing costs to rise by at least 25 basis points by year-end.
Higher rates could further pressure AI companies that are becoming more dependent on debt financing.
Oil prices offered some relief, falling 1.8% to a one-week low as a fragile U.S.-Iran ceasefire appeared to hold despite reports of drone attacks in Saudi Arabia, Jordan and Iraq. President Donald Trump said the U.S. was having "good talks" with Iran and that a deal to end the conflict was possible.
Later on Tuesday, the Conference Board's July consumer confidence report could provide a clearer picture of how the conflict is affecting household sentiment.
Johnson & Johnson rose 2% after saying it would pay an estimated $5.5 billion to resolve tens of thousands of lawsuits alleging its talc products caused cancer.
(Reporting by Johann M Cherian, Ragini Mathur and Utkarsh Tushar Hathi in Bengaluru; Editing by Shinjini Ganguli and Maju Samuel)
