Global financial markets took a rough turn Tuesday as U.S. chip stocks plummeted 8%, sending shockwaves through mid-year trading and reigniting debate over whether the artificial intelligence investment frenzy has reached bubble territory.
Memory chipmaker Micron Technology was among the hardest hit, dropping roughly 13% — wiping out all the gains it had posted just the day before. The company’s earnings report was due out Tuesday, giving investors a closely watched opportunity to gauge the health of AI-driven chip demand. Micron’s stock had surged more than 200% this year heading into the report.
The selloff wasn’t limited to the U.S. South Korea’s chip-heavy KOSPI index fell 10% earlier in the day, adding to the pressure on American markets.
Not everyone is ready to call the AI rally a bubble, however. SoftBank CEO Masayoshi Son has called that notion “blasphemy.” But after this week’s market turbulence, some investors appear less certain.
Markets stabilized somewhat overnight, with Asian exchanges and U.S. futures recovering a bit following Tuesday’s tech selloff, which saw the Nasdaq lose more than 2%. Still, analysts expect the episode to spark renewed scrutiny of stretched valuations in the technology sector.
SpaceX also made headlines for the wrong reasons. The rocket company’s stock fell sharply from its post-IPO peak over the past week, though shares did manage to find footing above the original listing price on Tuesday.
Adding to the uncertainty in tech, investors have been grappling with elevated expectations for Federal Reserve interest rate hikes since last week’s policy meeting. Forecasts vary widely — Bank of America anticipates three rate hikes through next January, while Citi still expects three rate cuts.
On the economic front, U.S. business surveys for June came in above expectations. Oil prices continued sliding toward four-month lows, with Brent crude dipping below $76 per barrel, as U.S.-Iran talks and increased shipping activity in the Gulf weighed on prices.
In currency markets, the U.S. dollar extended its recent winning streak on rate-hike expectations, with the dollar index hitting a 13-month high. Attention is also focused on whether the Bank of Japan might intervene to keep the dollar from reaching 40-year highs against the yen.
Japan’s government is also drawing attention for exploring new strategies to manage its $1.3 trillion in foreign exchange reserves.
In individual stock news, FedEx shares dropped 6% after hours following concerns about tightening profit margins revealed in its latest earnings report. Meanwhile, Morgan Stanley joined Apollo in reporting heavy withdrawals from flagship private credit funds, adding to ongoing unease in that corner of the financial world.
On the political front, a new Reuters/Ipsos poll found President Donald Trump’s overall approval rating has slipped to 34%, matching the lowest point of his second term, which was previously recorded in an April survey. His approval on cost-of-living issues stood at just 22%, near the lowest of his presidency and below the rating his Democratic predecessor Joe Biden held at the end of his term. The poll also found that only 24% of Americans believe the war with Iran was worth its costs.
Key events to watch include Micron Technology’s earnings report, U.S. first-quarter current account data at 8:30 a.m. EDT, May new home sales figures at 10 a.m. EDT, and Treasury auctions for 2-year and 5-year notes later in the day.
