Dow falls 320 points as Nasdaq slides 2.2% in AI tech selloff

• Semiconductor stocks led losses: Micron fell 12% ahead of earnings, SanDisk dropped 11%, Intel declined 6.4%, AMD and Qualcomm each fell over 6%, and Nvidia slid 3.3%.
• Global selloff intensified with SK Hynix down over 12% in South Korea, while semiconductor ETFs suffered steep losses (VanEck Semiconductor ETF down 6.4%, State Street Tech ETF down 3.7%).
• Markets are pricing in a second Fed rate hike by December (versus one hike expected two weeks ago) as investors await Thursday's PCE inflation data, the Fed's preferred inflation gauge.

Market Summary: Tech Selloff Accelerates on AI Spending Concerns

Key Market Moves:

U.S. markets opened sharply lower Tuesday, extending Monday's losses. The Nasdaq Composite fell 2.2%, the S&P 500 declined 1.5%, and the Dow Jones dropped 326 points. The selloff concentrated in semiconductor and AI-related stocks, with the VanEck Semiconductor ETF plunging 6.4% and the State Street Technology Select Sector SPDR ETF down 3.7%.

Major Stock Declines:

Micron Technology led losses with a 12% drop ahead of Wednesday earnings. Other semiconductor names posted steep declines: SanDisk (-11%), Seagate (-7%), Intel (-6.4%), AMD (-6%), Qualcomm (-7%), and Nvidia (-3.3%). Alphabet extended losses with another 1.6% decline. One unnamed company shed over $600 billion in market value over three sessions.

Global Impact:

The selloff spread internationally. South Korea's Kospi plummeted nearly 10%, with SK Hynix down 12%. Japan's Nikkei 225 fell 3.55%, ending an eight-session winning streak. European markets weakened, with the Stoxx 600 down 1% and technology stocks falling 3%.

Market Drivers:

Investors are questioning the sustainability of massive AI infrastructure spending, particularly as tech companies fund expansion through debt. Market expectations have shifted toward a more hawkish Federal Reserve, with traders now pricing in a second rate hike by December versus one hike expected two weeks ago.

Upcoming Catalysts:

Markets await Tuesday's June business activity surveys and Thursday's Personal Consumption Expenditures Index, the Fed's preferred inflation gauge. Geopolitical developments include a 60-day U.S. sanctions waiver on Iran following initial peace talks.

Morgan Stanley's Andrew Slimmon characterized the selloff as "healthy," noting AI stocks are "crowded" rather than expensive.