Updates prices to reflect midday trading, includes details from Turkey NATO meeting

By Pete Schroeder

WASHINGTON, July 7 (Reuters) - Global stocks dropped Tuesday, led by a decline in technology shares despite blockbuster results from Samsung Electronics, as investors' concerns about the sustainability of an AI-driven rally paired with renewed Middle East tensions that also drove up oil prices.

The tech-heavy Nasdaq Composite .IXIC was down 0.61% in midday trading, while the S&P 500 fell 0.26% and the Dow Jones Industrial Average .DJI dipped 0.33%. MSCI's gauge of stocks across the globe .MIWD00000PUS was down 0.49%.

The decline came even as Samsung Electronics 005930.KS forecast a 19-fold jump in April-June operating profit to 89.4 trillion won ($58.4 billion), a third straight quarter of record operating profit for the world's largest memory-chipmaker.

Rather than reassuring investors, the results triggered selling in Samsung and rival SK Hynix shares. Investors have increasingly questioned whether profit growth linked to artificial intelligence can be sustained if supply bottlenecks in key components such as memory chips ease.

"This is a record for Samsung, but rather than placate the markets, these strong results have led to fears that the AI chip sales boom cannot be sustained," Kathleen Brooks, research director at XTB, said.

Further weighing on markets was a Reuters report that Chinese startup DeepSeek was developing its own AI chip, which could reduce its reliance on other major chipmakers to train and run its AI models.

SK Hynix is due to join the Nasdaq this week in a $28 billion listing, one of the world's largest new share sales, as the chipmaker seeks to capitalise on the AI boom. The Philadelphia SE Semiconductor index .SOX was 4% down at midday, and is 13% lower in the last month.

The tentative calm in the Middle East was tested, as well Tuesday, as Qatar blamed Iran for an attack on two tankers in the Strait of Hormuz, with one tanker evacuating crew and at risk of exploding, Reuters reported.

The news sent oil prices higher, after they had largely returned to pre-war levels. U.S. crude CLc1 rose 2.83% to $70.49 a barrel and Brent LCOc1 rose to $74.17 per barrel, up 3.03% on the day.

NATO MEETS IN TURKEY

NATO leaders met in Turkey Tuesday, where European leaders unveiled arms deals worth tens of billions of dollars. However, U.S. President Donald Trump expressed frustration at what he said was insufficient support for the U.S.-Israeli war on Iran, and again resurfaced calls for the U.S. to gain control of Greenland from Denmark.

Trump said on Monday the U.S. would either reach a deal with Iran or "finish the job," renewing his threat of military action as Tehran projects defiance following the funeral of Supreme Leader Ayatollah Ali Khamenei.

In currency markets, the dollar index =USD, which tracks the U.S. currency against six others, was up 0.12% to 100.98, while the euro EUR= slid 0.16% against the dollar.

The yen JPY= continued to tread above 40-year lows, and was last at 161.92 per dollar. Traders were alert for intervention given signs of a possible shift in strategy by Japanese authorities.

The yield on benchmark U.S. 10-year notes US10YT=RR was up 4.41 basis points to 4.523% ahead of the release on Wednesday of the minutes of the Federal Open Market Committee's latest meeting. These may give investors more of a steer on how new Federal Reserve chair Kevin Warsh is approaching monetary policy.