A tech sell-off shook global markets on Tuesday as investors questioned soaring valuations and heavy spending on AI infrastructure. The tech-heavy Nasdaq index closed 2.2% lower, while the S&P 500 dropped 1.43%, though the Dow remained steady. All three major US indices have hit record highs this year, driven by a rush of funding for AI technology.
Some economists have warned that the influx of AI spending resembles a bubble similar to the dot-com era. Seven tech companies now make up 30% of the S&P 500's value, raising concerns about over-reliance on a single industry. These worries were heightened by signals from the Federal Reserve last week that it may increase interest rates to tackle rising inflation.
The sell-off began on Monday when Alphabet, Google's parent company, had its worst day in over a year, dropping 5% after two high-profile AI researchers left. Meanwhile, Elon Musk's SpaceX, which debuted on 12 June, fell 16% as its post-IPO boost faded. The company announced plans to raise $20bn in a bond sale, sparking concerns over massive AI-related spending.
Asian markets felt the impact on Tuesday, with South Korea's benchmark closing 10% down after chipmakers SK Hynix and Samsung Electronics both fell over 12%. Japan's Nikkei 225 dropped 3.5%. However, London's FTSE 100 remained steady, avoiding the sell-off.
