A global sell-off hit chip and AI stocks hard on Tuesday, spreading from Asia through Europe and into U.S. pre-market trading. The move was driven by concerns about stretched AI valuations and the prospect of higher U.S. interest rates.
The damage started in South Korea. Memory chip giants Samsung Electronics and SK Hynix both fell more than 12%, dragging the Kospi index down 10%. The losses were severe enough to trigger a 20-minute trading halt — the fourth such suspension in South Korea this year.
Japan was not spared either. The Nikkei closed 3.55% lower as selling pressure rippled across the region.
European chipmakers also took losses. ASML, the continent’s most valuable tech company, dropped more than 5%. Infineon, ASM International, and STMicroelectronics each fell between 5% and 8%. The Stoxx 600 Technology index dropped 3.2%.
The pain was visible across borders and sectors, pointing to a broader reassessment of how much investors are willing to pay for AI-linked stocks.
In U.S. pre-market trading, Micron fell more than 8% ahead of its quarterly earnings report due Wednesday. Intel dropped roughly 7.8%, while Advanced Micro Devices lost 6%. Nvidia, the market leader in AI chips, was down around 3%. The iShares Semiconductor ETF fell close to 5.9%.
Nasdaq 100 futures slipped 2.7%, with S&P 500 futures down 1.4%.
SpaceX shares also extended their losses, falling more than 4% in pre-market trading after a 16% drop on Monday. That slide added to concerns that private tech valuations may have stretched too far.
Amazon and Meta Platforms, two members of the so-called Magnificent Seven, also fell in pre-market trading. The broader tech pullback continued a trend that began on Monday, when the S&P 500 and Nasdaq Composite both moved lower.
Part of the pressure stems from a shift in interest rate expectations. Traders are now pricing in 50 basis points of Federal Reserve rate hikes by December — double what markets expected just two weeks ago.
This is relevant because higher rates raise the cost of borrowing for companies building out AI infrastructure. When funding becomes more expensive, it becomes harder to justify the high valuations the sector has been trading at.
Analysts were cautious but not alarmed. Tom Hulick, CEO of Strategy Asset Managers, told CNBC he does not see the sell-off as the start of a collapse.
“I don’t think we’re anywhere near some type of catastrophic failure in the markets. There’s too much liquidity out there, and the earnings momentum is very strong right now,” he said.
Wedbush analyst Dan Ives framed the move as a potential buying opportunity. He said the AI trade is still in the “3rd inning” and that the pullback could create “white knuckles” for tech investors ahead of Micron’s earnings report Wednesday.
The sell-off came just one day after the Philadelphia SE Semiconductor Index had hit a record high. Investors will be watching Micron’s results closely for signals on chip demand and whether AI spending is holding up.
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