Large-cap technology stocks weighed on the S&P 500, as investors worried that OpenAI's revenue might fall short of expectations, with concerns spreading to other artificial intelligence concept stocks and chipmakers. The Nasdaq 100 fell 1.4%, marking its largest single-day decline in seven weeks. The Philadelphia Semiconductor Index plunged 3.4%, and Wall Street's "fear gauge," the Cboe Volatility Index (VIX), rose for a second consecutive day.

A series of negative headlines intensified the sell-off in technology and AI-related shares by midday. OpenAI's annualized revenue came in $20 billion lower than the level reported by some media outlets. Oracle saw its shares fall after reports that it was trucking natural gas to server campuses to cope with power supply bottlenecks.

The small-cap benchmark escaped the worst of the selling, but the Russell 2000's decline from its record high approached 10%. The index is also testing its 200-day moving average, a key technical level. Chris Murphy, co-head of derivatives strategy at Susquehanna International Group, said: "What surprises me most is that the tech sell-off remains fairly concentrated, with more than two-thirds of S&P 500 constituents rising and small caps nearly flat. Strength in consumer staples and low-volatility stocks suggests a rotation toward defensive sectors rather than broad-based equity selling."

The 10-year US Treasury yield climbed to 5.2%, pressuring rate-sensitive sectors. Energy supply concerns also continued to weigh on investor sentiment. Reports that the White House has asked the Pentagon to prepare options for a potential strike on Iran, possibly before the midterm elections, pushed oil prices higher.

Hawkish comments from Federal Reserve Governor Waller also did little to improve market sentiment. He said further rate hikes may be needed to cool inflation, though policymakers have some flexibility on timing and need not tighten policy at consecutive meetings.

At the close, the S&P 500 fell 0.5% to 7,765.36; the Dow Jones Industrial Average rose 0.1% to 51,231.64; the Nasdaq Composite dropped 1.3% to 27,193.34; the Nasdaq 100 declined 1.4% to 30,725.81; and the Russell 2000 was nearly unchanged at 2,794.128.