Nasdaq Plunges Over 2% as Tech Sell-Off Accelerates
The global sell-off in technology stocks deepened on Tuesday, with the Nasdaq 100 opening more than 2% lower as investors grew wary of soaring artificial intelligence costs and a hawkish stance from the US Federal Reserve. The broader S&P 500 fell 1.6%, while the Dow Jones Industrial Average dropped around 0.7%.
Memory chip heavyweight Micron led the decline, tumbling over 11% amid concerns that rising demand for AI-related chips is driving up costs and creating shortages. The rout, which began on Wall Street on Monday, quickly spread to Asian markets on Tuesday.
Asian Markets Hit Hard; Korean Stocks Slide Nearly 10%
South Korea's benchmark KOSPI index slid nearly 10%, while Japan's Nikkei fell 3.5%. Korean semiconductor giants SK Hynix and Samsung both dropped more than 12% as the AI-driven momentum that had propelled these stocks to record highs lost steam.
The sell-off reflects growing investor skepticism about the sustainability of the AI boom, as companies report massive cash outflows for AI model development and compute infrastructure.
SpaceX Shares Dip Below $150, Valuation Slips
SpaceX shares continued their downward trajectory on Tuesday, falling around 1.5% and briefly dipping below the $150 mark—the price at which the rocket-to-AI company listed on Nasdaq roughly two weeks ago. This decline pushed its market capitalization below $2 trillion, after a 16% plunge on Monday.
The Elon Musk-led company, which made a spectacular Nasdaq debut, is now planning to tap bond markets to raise additional capital for its ambitious AI initiatives in space.
Rising AI Costs Emerge as Top Investor Concern
Rising AI costs have become the primary worry for investors, as numerous corporations report the cash-intensive nature of AI models and increasing demand for memory chips, leading to shortages and price hikes. Hyperscalers such as Alphabet, Amazon, and Microsoft have committed hundreds of billions of dollars to expand data center capacities, raising concerns about overinvestment.
According to market analysts, the combination of massive spending on AI infrastructure and the potential for a slowdown in demand growth is fueling the current rout.
Fed's Hawkish Stance Adds to Pressure
Investors are also weighing the possibility of at least two interest rate hikes by the US Federal Reserve this year, following hawkish commentary from the Kevin Warsh-led central bank in its June policy review. A key inflation gauge due later this week will be closely watched for clues on the Fed's next move.
The Fed's tightening stance, aimed at curbing inflation, is adding pressure on tech stocks, which are particularly sensitive to higher borrowing costs.
Energy Markets and Geopolitical Factors
Investors are also monitoring energy markets after the US government waived sanctions on Iranian oil and petrochemical exports on Monday. Although a peace agreement between the US and Iran is in place, with talks for a more durable accord underway and the Strait of Hormuz now open, high inflation and risks of second-round effects are expected to persist.
This development could influence global inflation trends and further impact investor sentiment.
