Chip and AI Stocks Slide, Dragging the Nasdaq Down 2.2 Percent

U.S. stocks fell sharply Tuesday as a sell-off in artificial intelligence and chip shares spread from Asia to Wall Street. The Nasdaq Composite closed down 2.2 percent and the S&P 500 fell 1.4 percent, NBC News and The Guardian reported. The Nasdaq 100 dropped more than 3.2 percent, NBC reported, while the Dow remained steady, according to the Guardian. The declines came after the Nasdaq Composite had already fallen 1.3 percent on Monday, CNBC reported.

Memory and chip makers took the worst losses. NBC reported that Sandisk, Micron Technology and Arm each fell more than 10 percent, Marvell, Analog Devices, Western Digital, Texas Instruments and Qualcomm fell about 9 percent, and Nvidia, the world’s largest public company, lost 4.15 percent. The rout began overnight in Asia, where South Korea’s Kospi closed 10 percent lower after Samsung and SK Hynix each fell more than 12 percent, both outlets reported. Japan’s Nikkei 225 ended 3.5 percent lower, the Guardian said. NBC noted that the Kospi has been volatile this year, falling 8.2 percent earlier in June before recovering by almost the same amount the next day.

Analysts pointed to several causes. NBC reported that investors worried about the sustainability of huge gains in tech stocks and feared that inflation tied to the Iran war and the closure of the Strait of Hormuz could lead to higher interest rates and more expensive borrowing for the AI buildout. The Guardian said concern was heightened by signals last week from the Federal Reserve that it might raise rates to fight rising inflation. JPMorgan analysts said the selling may reflect “anxiety” before Micron reports earnings Wednesday afternoon, NBC reported, and Dan Ives of Wedbush Securities called it one of the “gut check moments” in the tech trade.

SpaceX shares were at the center. The company, which went public June 12, fell nearly 17 percent Monday, erasing about $400 billion in value, the second-largest one-day wipeout for any stock on record, according to Bloomberg figures cited by NBC. Selling accelerated after SpaceX announced its first bond offering, which Bloomberg reported was aimed at raising about $20 billion on top of the $85 billion raised in the IPO. Shares dipped below the $150 debut price Tuesday, to as low as $147, before ending up 1.7 percent, NBC reported. Recent selling has erased more than $915 billion from the company’s peak of more than $225 a share, a week earlier. Ipek Ozkardeskaya of Swissquote told the Guardian the bond sale revived concerns that Big Tech is spending too much on AI infrastructure and financing it with debt; she noted Morgan Stanley’s estimate that AI-related borrowing will exceed $500 billion this year.

Alphabet also weighed on the market. Its shares fell about 5 percent Monday, their worst day in more than a year, after two high-profile AI researchers left for rivals, CNBC and NBC reported. Amazon dropped nearly 5 percent and Meta 2 percent on Monday, CNBC said.

The drop comes after a strong run. The Guardian reported that the Nasdaq is up about 10 percent this year, the S&P 500 is up 7.3 percent and the Dow has passed 51,000, with seven companies accounting for roughly 30 percent of the S&P 500’s value, which leaves some economists warning of a bubble reminiscent of the dot-com era. Micron shares are still up more than 260 percent this year, NBC noted. “This morning is just another one of those moments,” Ives said, adding that the AI revolution remains “in the 3rd inning.” In Europe, the Stoxx 600 closed down 0.8 percent and Germany’s DAX fell 1 percent, NBC reported.