Key facts
- Wall Street experienced a broad sell-off, particularly in technology stocks, due to concerns over AI-driven valuations.
- The S&P 500 fell 1.4%, the Dow Jones Industrial Average dropped 0.1%, and the Nasdaq Composite declined 2.2%.
- The Nasdaq 100 index sank 3.3%, and a key chipmaker index fell 8%.
- South Korea's Kospi experienced a significant plunge of 10% from its record high.
- Investors moved into safe-haven assets like US Treasuries and currencies such as the Japanese yen and Swiss franc.
- Bitcoin also saw a decline, losing 3%.
Wall Street experienced a significant sell-off, with technology giants leading the decline, raising concerns that the artificial intelligence-fueled bull market may be overextended. The tech rout spread globally, igniting volatility amid worries about frothy valuations after a prolonged surge in riskier assets.
The S&P 500 fell 1.4%, ending a streak of strong weekly gains. The Dow Jones Industrial Average, less exposed to tech, closed down 0.1%. The Nasdaq Composite saw a steeper decline of 2.2%, with the Nasdaq 100 index dropping 3.3%. A closely watched gauge of chipmakers slid about 8%.
Losses were particularly pronounced in Asia, with South Korea's Kospi plunging 10% from its record high. Foreign investors reportedly offloaded over $2.5 billion of Kospi shares, with market watchers citing forced liquidations among retail investors and selling tied to leveraged ETFs tracking SK Hynix and Samsung Electronics. Volatility was centered on memory providers, a key driver of equity gains this year, following a report that SK Hynix is shifting focus to cheaper products.
In response to the risk-off sentiment, investors sought safety in US Treasuries, while haven currencies like the Japanese yen and Swiss franc outperformed. Bitcoin also declined, losing 3%. Oil prices dipped, with increased tanker activity observed in the Strait of Hormuz following an interim peace deal between the US and Iran.
Analysts noted that the sell-off reflects fears that AI exuberance may be overdone. While warnings about tech euphoria are not new, the recent slide was amplified by significant swings in the market. Some strategists view the current weakness as a potential buying opportunity, while others emphasize the importance of diversification and caution against complacency given the level of leverage in markets.
Looking ahead, Micron Technology's upcoming earnings report is expected to be a key test of demand for AI infrastructure. Corporate highlights included FedEx reporting better-than-expected earnings and raising its profit outlook, and SpaceX drawing substantial demand for its debut bond sale.