Global markets experienced a significant downturn on Tuesday as investors expressed growing doubts regarding the sustainability of high valuations in the artificial intelligence and chip sectors. By 11:45 a.m. ET, the Nasdaq Composite had dropped 2%, while the Nasdaq 100, tracking the largest non-financial stocks, plunged more than 3%.
The sell-off was fueled by concerns over rising inflation linked to the ongoing conflict involving Iran and the potential closure of the Strait of Hormuz, which analysts fear could lead to higher interest rates and increased borrowing costs for AI infrastructure development. According to NBC News, major semiconductor players including Micron Technology, Western Digital, Arm, and Qualcomm saw shares fall by approximately 9%.
SpaceX continued its volatile trend, with shares tumbling following a massive $900 billion value wipeout since its peak last week. Alphabet also faced pressure after high-profile talent departures, recording a continued downward trajectory. In Asia, Korea’s Kospi index closed down 10% as major tech firms Samsung and SK Hynix saw double-digit losses.
JPMorgan analysts noted that the market movement reflects pre-earnings anxiety ahead of Micron’s Wednesday report. Despite the volatility, Dan Ives of Wedbush Securities described the event as a “gut check moment” for the AI sector, noting that the industry is still in the early stages of its development. Meanwhile, oil prices saw a slight decline as traders digest the tentative U.S.-Iran truce, though Société Générale warns that a full recovery of transit flows through the Strait of Hormuz remains gradual due to logistical constraints.