Dow hits record high as semiconductor stocks tumble on AI bubble fears

US stocks closed mixed Wednesday as a sharp selloff in semiconductor shares weighed on the broader market. Weaker-than-expected June jobs data eased fears of further interest rate hikes, but growing doubts about the profitability of AI investment kept pressure on chip stocks.

The Dow Jones Industrial Average rose 594.83 points, or 1.14 percent, to close at a record 52,900.07 on the New York Stock Exchange on Wednesday (local time).

The S&P 500 edged up 0.01 points to finish at 7,483.24, while the Nasdaq fell 207.36 points, or 0.80 percent, to close at 25,832.67.

Markets were focused on June employment data. According to the Ministry of Employment and Labor, nonfarm payrolls grew by 57,000 in June, well below the 115,000 forecast compiled by Dow Jones. The softer reading reinforced expectations that the Federal Reserve will hold interest rates steady for now.

According to the CME FedWatch tool, fed funds futures markets priced in a 23 percent probability that the Fed will keep rates unchanged through year-end, up from 17 percent the previous day. The probability of at least one additional rate hike fell to 77 percent from the prior session.

Profit-taking hit AI-related semiconductor stocks that had surged in recent weeks. The Philadelphia Semiconductor Index fell 5.44 percent, bringing its two-session decline to more than 11 percent. The VanEck Semiconductor ETF (SMH) also dropped 4.60 percent.

Among individual stocks, Micron fell 5.49 percent after tumbling more than 10 percent the previous day. Nvidia dropped 1.39 percent, Broadcom fell 2.41 percent, AMD declined 4.26 percent, Intel lost 5.25 percent, and Marvell Technology slid 9.84 percent.

Market observers attributed the selloff to a combination of profit-taking and mounting concerns about the return on AI investment. Questions are growing over whether massive spending on AI chips and data centers will translate into meaningful gains in profitability and productivity, dampening sentiment across the semiconductor sector.

Anshul Sharma, chief investment officer at Savvy Wealth, told CNBC that a rotation is underway, with money moving out of sectors that have rallied sharply in recent months and into others. "At the same time, some reassessment of the value of AI investment is also taking place," he said. He added that as companies become more sensitive to computing costs, AI spending could shift toward cost efficiency going forward.

Tesla fell 7.49 percent despite reporting second-quarter vehicle deliveries that beat market expectations, as investors locked in gains following the stock's recent sharp run-up.

Consumer staples and healthcare stocks outperformed. Walmart gained 2.78 percent, Costco rose 2.92 percent and Coca-Cola advanced 3.51 percent, while Johnson & Johnson climbed 3.57 percent, AbbVie gained 3.99 percent and Eli Lilly added 1.86 percent.

Oil prices edged up on the day. Brent crude for September delivery rose 0.3 percent to $71.80 a barrel on the London ICE Futures Exchange, while West Texas Intermediate for August delivery settled 0.2 percent higher at $68.69 a barrel on the New York Mercantile Exchange.

US markets will be closed Thursday ahead of the Independence Day holiday on Friday.