Summary<\/p>\n
US tech stocks dropped Tuesday as panic spread beyond Asia.
\n South Korea’s stock market plunged 10% as tech stocks fell worldwide.
\n Traders worry AI valuations have climbed too high.<\/p>\n
\n AI-generated summary was reviewed by a CNN editor.<\/p>\n
\n Volatility has returned to the stock market, and AI is once again the culprit.\n <\/p>\n
\n A mild US tech sell-off Monday carried over into Asia Tuesday. But that nervous energy sentiment quickly spiraled into full-on panic trading in South Korea, where the Kospi index tumbled 10% Tuesday, tripping a circuit breaker that led to a 20-minute cooling-off session.\n <\/p>\n
\n SK Hynix and Samsung, two of the world\u2019s leading memory chipmakers<\/a>, tumbled more than 12%, dragging the rest of South Korea\u2019s stock market down with them (the two chipmaking giants make up about half of the Kospi\u2019s total market value).\n <\/p>\n \n Traders\u2019 fear isn\u2019t about anything specific, and there wasn\u2019t any obvious catalyst to lead to such enthusiastic selling.\n <\/p>\n \n But those nerves appear to be returning in the United States, where tech stocks were headed for a rough day: The tech-heavy Nasdaq dropped 2.2% Tuesday morning, one day after falling 1.3%.\n <\/p>\n \n The broader S&P 500 fell 1.5%. The Dow was 350 points lower at the opening bell, or 0.68%. Wall Street\u2019s fear gauge jumped 17%, signaling elevated market volatility.\n <\/p>\n \n Some market analysts pointed to jitters sparked by Google (GOOG<\/a>) and SpaceX (SPCX<\/a>) falling somewhat sharply Monday. But Google\u2019s 5% decline was mostly because of a high-profile AI leader defecting to Anthropic, and SpaceX \u2013 which dropped 16% Monday \u2013 has some post-IPO jitters that are typical for companies whose stocks boom right out of the gate.\n <\/p>\n \n Google fell 2% Tuesday, while SpaceX fell 3%. Nvidia (NVDA<\/a>) was about 4% lower, weighing on the broader market. Oracle (ORCL<\/a>) fell 3% and is down 25% this month.\n <\/p>\n \n Other analysts suggested the markets were reacting to the likelihood that the Federal Reserve may raise interest rates later this year. But that\u2019s not exactly new information: New Fed Chairman Kevin Warsh held his first press conference last Wednesday to announce that the Fed would double down on its mission to get inflation under control \u2013 a promise that prompted a market sell-off as it interpreted Warsh\u2019s words as a pledge to raise interest rates later this year.\n <\/p>\n \n Whatever the cause, with AI companies\u2019 sky-high valuations and incredible growth trajectories, it doesn\u2019t take much to set off investors. The Kospi is up 90% this year, so when the wind blows in an unexpected direction, it can lead traders \u2013 and, often more consequentially, trading algorithms \u2013 to head for the exits. They fear the top of the Jenga tower could tip over.\n <\/p>\n \n The problem, as always with markets, is no one knows how high the Jenga tower goes. We could still be building the foundation.\n <\/p>\n \n Nevertheless, the fear in South Korea spread throughout Asia. Japan\u2019s Nikkei fell 3.6% and tech behemoth Softbank sank 15%. Most other Asian indexes were down more than 1%.\n <\/p>\n \n Although tech stocks have been under pressure lately, they really haven\u2019t dropped all that much: The Nasdaq is down about 5.5% from its record high set on June 2.\n <\/p>\n