A global tech sell-off shook markets on Tuesday, shifting investor focus from the US war with Iran toward the future of chipmakers and AI companies. The Nasdaq index closed 2.2% lower and the S&P 500 dropped 1.43%, while the Dow remained steady. During the first two days of the week, nearly $1.3 trillion was wiped from the market capitalization of Nasdaq 100 companies.
The decline was driven by growing nerves among investors regarding the sustainability of the AI boom. Major stocks, including Nvidia and Alphabet, fell as Wall Street shifted from rewarding AI spending to demanding evidence that the massive investments in infrastructure will produce outsized returns. Some investors have begun to question whether the current spending is worth the investment or if it represents a large bubble.
US technology stocks mostly rebounded on Wednesday amid choppy trading following the previous session's global selloff. Alongside these volatility concerns, investors are also bracing themselves for a more hawkish US Federal Reserve.