AI-related stocks declined on Tuesday as investors braced for Nvidia's earnings, expected to provide insight into AI demand and justify high valuations. Concerns over slowing infrastructure investments and competition from low-cost Chinese AI models weighed on the market.

Tech stocks suffered further losses after a report revealed Microsoft had scrapped data centre leases in the US.

Nvidia dropped 2.1% ahead of its crucial earnings release, while semiconductor firms like Broadcom and Micron slid around 2.1%. Investor scepticism over AI spending deepened following breakthroughs by China's DeepSeek.

The sector also faced pressure from reports that Washington plans to tighten restrictions on Nvidia's chip exports to China. US officials are consulting allies about stricter chip controls, adding to uncertainty in the market.

Data centre operators and power firms, expected to benefit from AI growth, also declined. Digital Realty slipped 1.2%, while power providers Vistra and Constellation Energy lost 5.9% and 3.3% respectively.

AI server maker Super Micro Computer led losses on the S&P 500, falling 8.7%, while Palantir dropped 3.7%.