Global tech rout intensifies as shares extend losses, Nasdaq down over 2%
New York, June 23
The sell-off in global tech stocks intensified on Tuesday as investors became wary of the frenzy around AI, adopting a more cautious approach and evaluating the next steps on how to navigate the technology's soaring costs.
Nasdaq 100 extended the selloff opening more than 2 per cent lower on Tuesday, with memory chip heavyweight Micron down more than 11 per cent. The S&P 500 fell 1.6 per cent while the Dow Jones Industrial Average dropped around 0.7 per cent as investors weighed concerns around rising AI costs along with a hawkish US Fed.
The tech rout that started on Monday from Wall Street engulfed the Asian markets on Tuesday, with Korea's benchmark KOSPI sliding nearly 10 per cent and Japan's Nikkei down 3.5 per cent. Korean semiconductor heavyweights SK Hynix and Samsung tanked more than 12 per cent as the AI momentum that took these shares to stratospheric heights lost steam.
SpaceX shares continued their downward journey on Tuesday, falling around 1.5 per cent and briefly going below the USD150 mark at which the rocket-to-AI company had listed around two weeks ago. That led to its market valuation slipping below the USD2 trillion market capitalisation. The stock had tanked 16 per cent on Monday. The Elon Musk-led company, which made a spectacular debut on Nasdaq, is going to tap the bond markets to raise more money as it plans to take the AI battle to space.
Rising AI cost has emerged as the top concern among investors, with many corporate entities reporting the cash-guzzling nature of the AI models and rising demand for memory chips creating a shortage, leading to rising prices. Coupled with the massive spending on developing the compute infrastructure needed to train the AI models, the risks around the entire AI boom have risen. Hyperscalers like Alphabet, Amazon and Microsoft have committed hundreds of billions of dollars to expand the data centre capacities.
Investors are also weighing possibilities of at least two rate hikes by the US Fed this year as the Kevin Warsh-led central bank delivered a hawkish commentary in the June policy review. Investors will closely watch a key inflation gauge this week to assess the Fed's likely move.
Investors will also keep an eye on the energy markets as the US government waived sanctions on Iranian oil and petrochemical exports on Monday. Even though a peace agreement is in place between the US and Iran with talks for a more durable accord underway, and the critical Strait of Hormuz now open, the already high inflation and risks of second-round effects are likely to persist.
— ANI
Reader Comments
Meanwhile our Indian markets are also getting dragged into this mess 😤. Every time Wall Street sneezes, we catch a cold. But honestly, the AI hype was way overdone - everyone was throwing money at anything with "AI" in its name. Time for some reality check!
The Fed's hawkish stance is going to hurt emerging markets like India. We're already seeing FII outflows. The upside is that this correction might make AI stocks more reasonably priced for long-term investors. Just need patience, yaar.
Interesting how everyone was celebrating AI as the next big thing, and now suddenly it's "cash-guzzling" and risky. Maybe we should learn from this - not every new technology needs billions in investment overnight. Slow and steady wins the race, as we say in India 🐢
The KOSPI falling 10% is insane! And Samsung and SK Hynix down 12% - these are massive companies. But honestly, this correction was needed. The valuations were detached from reality. Our Indian IT stocks have also become more reasonable now. Good time to enter for long-term.
As someone who works in tech, this is sobering but not surprising. The AI infrastructure build-out is extraordinarily expensive. Companies are spending billions on chips and data centers without clear ROI. This pullback is healthy - it forces investors to ask hard questions about sustainability rather than just chasing the hype.
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.