SynopsisUS stocks fell as renewed AI disruption fears hit software shares, while rising oil prices and shifting Federal Reserve rate expectations added pressure to markets. The S&P 500, Nasdaq and Dow declined as investors awaited inflation data, weighed Middle East tensions and reassessed the outlook for interest rates and equities.

S. stocks ended lower on Tuesday as renewed concerns over the threat artificial intelligence poses to software companies weighed on the S&P 500, while rising oil prices and shifting expectations for Federal Reserve policy added to pressure on equities, according to Reuters.

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Software stocks were among the main drags on the market. Salesforce, ServiceNow and Intuit fell, sending the S&P 500 software and services index lower for a second straight session.

The latest selling followed OpenAI's launch of its newest model, GPT-6 Astra, which has revived concerns that increasingly capable AI systems could compete with products and services offered by specialized software companies." Astra has kind of reignited the software disruption fears and it's resumed that old trend that we got used to for a while, where semiconductor stocks and data center capex beneficiaries do well, while software stocks do poorly," said Jed Ellerbroek, portfolio manager at Argent Capital Management, according to Reuters.

The contrast was particularly visible across technology. Intel rose sharply and Qualcomm gained after reaching a deal with Amazon to develop custom AI chips, highlighting the continued investor preference for companies positioned to benefit directly from the expansion of AI infrastructure.

The broader market was also dealing with renewed inflation and geopolitical concerns. Oil prices touched a six-week high after Iran-backed Houthis in Yemen attacked Saudi energy facilities, setting oil installations ablaze and raising the risk of a wider Middle East conflict.

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The conflict between the United States and Iran is beginning to look less like a temporary disruption and more like a longer-term backdrop for markets," said Jeff DerGurahian, chief investment officer at loanDepot, according to Reuters. That rise in oil prices comes at a sensitive point for markets.

Investors are awaiting producer and consumer price data this week for clues on whether inflation pressures are continuing to ease before the Federal Reserve's September 15-16 policy meeting. Traders now see a 60% chance of an interest rate increase next week, according to the CME FedWatch tool, after stronger-than-expected August employment data boosted expectations for tighter monetary policy.