The Nasdaq and the S&P 500 closed at more than one-week lows Tuesday, dragged down by sharp losses in semiconductor stocks as investors scrutinized growing debt-funded AI spending and ‌braced for a more hawkish U.S. Federal Reserve. The Dow ended slightly lower.

The ​Philadelphia SE Semiconductor index and the S&P 500 information tech sector index both fell.

Nvidia and Alphabet slid while chipmakers Intel, Marvell Technology and Advanced ⁠Micro Devices also fell.

“Some of the news lately about AI raises questions ​about all the spending that’s being done and the capex and ramping of the capacity ⁠for semiconductors," said Thomas Martin, senior portfolio manager at Globalt.

Concerns over hyperscalers' debt-funded AI spending have contributed to the selloff. Elon Musk's SpaceX, which debuted this month, has joined a list of megacaps tapping ‌the bond market to raise capital.

Shares of SpaceX rose, following losses in ​the last three sessions.

Memory ‌chipmakers Micron Technology and SanDisk , among the best performers on the S&P 500 this year, fell.

Micron's earnings results on ‌Wednesday could offer clues on the outlook for the memory and AI chip sector after a searing rally this year.

U.S. stocks closed markedly lower Tuesday, led by a sharp decline in technology shares. According to preliminary daa, the Nasdaq Composite plummeted practically a fully 580 points, i.e. 579.56 points, or 2.21%, to 25,587.04, while the S&P 500 dropped 107.33 points, or 1.44%, to 7,365.46.

The Dow Jones Industrial Average slipped 45.87 points, or 0.09%, to 51,666.84, and the Russell 2000 fell 29.27 points to 2,975.13.

The ⁠CBOE Volatility Index, Wall Street's fear gauge, hit an over-one-week high.

Traders are increasingly betting on a second interest ‌rate hike by the Fed by December, according to LSEG data, compared to expectations of just one 25-basis-point hike two weeks ago, as investors price in hawkish monetary policy under new ‌Chair Kevin Warsh.

Personal ​Consumption Expenditures Price Index ‌data, the Fed's preferred inflation gauge, is expected on Thursday. Investors are watching developments in the Middle East after the U.S. waived sanctions on Iran for ​60 days following the first round of talks under a nascent peace deal.