July 22 (Reuters) – U.S. stock index futures dipped on Wednesday, pressured by weakness in chip stocks, as investors remained cautious ahead of the first batch of Big Tech earnings that could decide whether Wall Street's AI-driven rally has more room to run.
After months of gains that pulled the major indexes up from their March lows, momentum has faltered as volatility in heavyweight semiconductor shares has dented risk appetite.
Investors are now looking to results from Alphabet and Tesla, the first of the so-called "Magnificent 7" megacap stocks to report results, after the bell for fresh evidence that these companies' multibillion dollar investments in AI are paying off.
Alphabet will be under particular scrutiny after a delay in the launch of a model central to its AI ambitions intensified concerns.
"If Big Tech — which is funneling its free cash flow into chipmakers' pockets, and which has yet to demonstrate that these investments are generating sufficient returns — shows signs of slowing the pace of spending, another wave of selling could hit the semiconductor sector," said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
Texas Instruments, also due to report after the close, slipped 1.7% in premarket trading, tracking broader weakness across semiconductor stocks.
The heavy earnings slate sets markets up for a potentially choppy week, with geopolitical risks adding to the caution.
Fighting in the Middle East remained in focus as threats to shipping by Yemen's Iran-backed Houthi militia, alongside a widening conflict, disrupted two of the world's most important energy chokepoints.
U.S. Secretary of State Marco Rubio said Washington was still willing to negotiate an end to the Iran crisis, but that Tehran was "not serious" about talks.
Oil prices hovered near six-week highs, complicating the outlook for central bankers.
The Federal Reserve is expected to keep interest rates steady for the rest of 2026, according to the median forecast in a Reuters poll of economists, though respondents said the risk of a rate hike remained elevated.
Traders are pricing in more than a 70% chance the Fed leaves rates unchanged at next week's meeting, CME Group's FedWatch tool showed.
At 5:39 a.m. ET, Dow E-minis were down 45 points, or 0.09%, and S&P 500 E-minis were down 22 points, or 0.29%. Nasdaq 100 E-minis were down 208.75 points, or 0.71%.
Among premarket movers, Super Micro Computer surged 16.8% after the AI server maker said it had secured more than $60 billion in new fourth-quarter orders and now expects gross margin to exceed its previous gross-margin forecast.
(Reporting by Ragini Mathur in Bengaluru; Editing by Amanda Cooper and Joyjeet Das)
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