Key facts
- U.S. technology megacaps, including Alphabet and Amazon, experienced significant declines on Monday.
- SpaceX shares dropped approximately 16%, reversing initial IPO gains and raising concerns about its valuation.
- Investor anxiety is driven by substantial capital expenditures on AI infrastructure and uncertainty about future returns.
- Chipmakers, particularly Micron Technology, showed strength, rising to a record high and announcing an AI infrastructure agreement with Anthropic.
- A hawkish Federal Reserve outlook, with a September rate hike fully priced in, contributed to broader market weakness.
U.S. technology megacaps, including Alphabet and Amazon, experienced a significant downturn on Monday, with Alphabet on pace for its largest one-day percentage drop since May 2025 and potentially losing over $256 billion in market capitalization. Amazon.com lost 4.8%, while Meta Platforms and Microsoft eased around 3% each, collectively shedding more than $248 billion in market value. This slump is attributed to investor anxiety over substantial capital expenditures for artificial intelligence infrastructure and the uncertainty surrounding the generation of returns to justify these massive spends.
Adding to the market pressure, SpaceX shares dropped approximately 16%, marking its biggest loss since its IPO and reversing all initial trading gains. The company outlined debt-raising plans, and its shares fell further in afterhours trading, concerning retail investors and threatening its $2 trillion market valuation.
In contrast, chip-related stocks showed resilience. Micron Technology, a memory chipmaker, led the gains, rising 5.8% to a record high. The company also announced a strategic agreement with Anthropic to scale next-generation AI infrastructure, highlighting a market divergence between companies benefiting from AI demand and those facing increased spending pressures. Globally, tech stocks declined, with South Korea's KOSPI index down nearly 10% on Tuesday, partly due to warnings about the Korean won's weakness.
The broader market sentiment was also affected by a hawkish Federal Reserve outlook, with a rate hike fully priced in for September and a more than 50% chance of two by year-end. Oil prices continued their slide under $80 per barrel, with Brent crude trading around $77/bbl amid signs of returning oil flows through the Strait of Hormuz. In currency markets, the yen flirted with 40-year lows, with dollar strength overshadowing the Bank of Japan's recent rate hike.