U.S. stock market fell sharply on Wednesday as investors sold AI semiconductor stocks amid geopolitical tensions and persistent inflation concerns.

What happened: The Dow Jones Industrial Average fell 1.9%, the Nasdaq Composite slid 2%, and the S&P 500 dropped 1.6%. Major AI semiconductor stocks including Broadcom Inc. and NVIDIA Corp. fell 5.1% and 3.7%, respectively. The VIX fear gauge rose 11.8% to 22.22.

Why it matters: Strong jobs data for May and solid U.S. economic fundamentals have raised concerns that the Federal Reserve is unlikely to cut interest rates soon, while sticky inflation and a spike in U.S. government bond yields suggest the central bank may even raise the Fed fund rate by year-end. Separately, escalation of the U.S.-Iran war in the Middle East also dented investor confidence in risky assets like equities.

What to watch: West Texas Intermediate crude futures rose 2.07% to $90.03 a barrel, while Brent crude futures increased 1.8% to $93.10, as investors assess the fallout from Middle East tensions. Decliners outnumbered advancers on the NYSE by a 1.87-to-1 ratio and on the Nasdaq by a 1.77-to-1 ratio.