US stocks opened lower on Tuesday as a technology-led selloff accelerated, with semiconductor and artificial intelligence-related stocks coming under renewed pressure.
The Dow Jones Industrial Average fell 326 points. The Nasdaq Composite dropped 2.2% while the S&P 500 was down 1.5%.
The weakness followed Monday’s session, when the Nasdaq Composite fell 1.3%, weighed heavily by Alphabet and other megacap technology companies.
The selloff quickly spread to global markets overnight.
South Korea’s Kospi index led regional losses, falling nearly 10% after a steep decline in technology shares.
Memory chipmaker SK Hynix, one of the biggest beneficiaries of the AI rally, closed down more than 12%.
Japan’s Nikkei 225 also declined 3.55%, ending an eight-session winning streak.
Semiconductor and AI stocks lead declines
The selloff was particularly pronounced across semiconductor and AI-linked stocks.
Micron Technology dropped 12% in trading ahead of its quarterly results scheduled for Wednesday.
SanDisk fell nearly 11%, while storage company Seagate Technology shed more than 7%.
Intel declined more than 6.4%, while Advanced Micro Devices and Qualcomm fell more than 6% and 7%, respectively.
Nvidia dropped 3.3%, and Alphabet extended Monday’s losses with another 1.6% decline.
The State Street Technology Select Sector SPDR ETF fell 3.7% in early trading, while the VanEck Semiconductor ETF declined 6.4%.
Morgan Stanley Investment Management senior portfolio manager Andrew Slimmon described the selloff as a healthy development.
“The AI beneficiaries are the sell-off, and I don’t think they’re expensive, but they’re crowded,” Slimmon said on CNBC’s “Squawk Box” Monday. “It’s captured kind-of the zeitgeist of the momentum traders and when that happens, you’re going to have sharp sell offs like we’re having. I’d argue it’s healthy.”
European markets also weakened, with the pan-European Stoxx 600 index falling 1%.
The region’s technology sector declined 3%, led by losses of more than 6% in Dutch semiconductor equipment maker ASMI and chipmaker STMicroelectronics.
Fed concerns and AI spending scrutiny remain in focus
Investors are increasingly questioning whether the massive spending commitments on AI infrastructure can be sustained, particularly as many large technology companies continue to fund expansion through debt issuance.
SpaceX fell 2.5% in trading, putting the stock on pace for a fourth consecutive decline.
More than $600 billion has been wiped from the company’s market value over the past three sessions.
Markets are also adjusting to expectations of a more hawkish Federal Reserve.
According to LSEG data, traders are increasingly pricing in a second interest-rate increase by December, compared with expectations of only one 25-basis-point hike two weeks ago.
Attention later on Tuesday will turn to private surveys of June business activity, while investors continue to await Thursday’s release of the Personal Consumption Expenditures Index, the Federal Reserve’s preferred inflation gauge.
Developments in the Middle East also remain in focus after the United States waived sanctions on Iran for 60 days following the first round of talks under an emerging peace agreement.
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