Volatility has returned to the stock market, and AI is once again the culprit.<\/p>\n
The tech-heavy Nasdaq dropped 2.21 percent and the S&P 500 fell 1.44 percent as investors sold semiconductor chip stocks and other AI-related shares. The Dow, which has less exposure to tech, was down about 0.1 percent.<\/p>\n
The S&P and Nasdaq each had their worst day in about two weeks. The declines came after steep sell-offs in Asia. Nerves about AI quickly spiralled into full-on panic trading in South Korea, where the Kospi index tumbled 10 percent, tripping a circuit breaker that led to a 20-minute cooling-off session.<\/p>\n
SK Hynix and Samsung, two of the world’s leading memory chipmakers, tumbled more than 12 percent, dragging the rest of South Korea’s stock market down with them (the two chipmaking giants make up about half of the Kospi’s total market value).<\/p>\n
US markets kicked off the week on a down note, with the Nasdaq falling 1.3 percent on Monday (local time) before extending losses Tuesday. The mild US tech-sell off Monday spilled into Asian trading hours, and then the sell-off intensified Tuesday.<\/p>\n
“These big moves are part of a growing trend of rising volatility in tech stocks generally,” James Reilly, senior markets economist at Capital Economics, said in a note. “This volatility is, in our view, evidence of excessive froth and calls into the question the sustainability of this rally.”<\/p>\n
Traders’ fear isn’t about anything specific, and there wasn’t any obvious catalyst to lead to such enthusiastic selling. But those nerves continued in the United States, where tech stocks were having a rough day. Some investors might be taking profits after strong rallies.<\/p>\n
Some market analysts pointed to jitters sparked by Google (GOOG) and SpaceX (SPCX) falling somewhat sharply Monday. But Google’s 5 percent decline was mostly because of a high-profile AI leader defecting to Anthropic, and SpaceX – which dropped 16 percent Monday – has some post-IPO jitters that are typical for companies whose stocks boom right out of the gate.<\/p>\n
Google fell less than 1 percent Tuesday, while SpaceX gained about 1 percent after fluctuating in volatile trading. Nvidia (NVDA) was about 4 percent lower, weighing on the broader market. Oracle (ORCL) fell more than 5.5 percent, putting it down about 27 percent this month.<\/p>\n
Other analysts suggested the markets were reacting to the likelihood that the Federal Reserve may raise interest rates later this year. But that’s 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 – a promise that prompted a market sell-off as it interpreted Warsh’s words as a pledge to raise interest rates later this year.<\/p>\n
Semiconductor chip stocks, which have led the market rally this year, fell sharply Tuesday: Micron Technology (MU) dropped 13 percent. Marvell Technology (MRVL) sank 9 percent. Traders are awaiting Micron’s quarterly earnings results on Wednesday.<\/p>\n
Whatever the cause, with AI companies’ sky-high valuations and incredible growth trajectories, it doesn’t take much to set off investors. The Kospi is up more than 90 percent this year, so when the wind blows in an unexpected direction, it can lead traders – and, often more consequentially, trading algorithms – to head for the exits. They fear the top of the Jenga tower could tip over.<\/p>\n
The problem, as always with markets, is no one knows how high the Jenga tower goes. We could still be building the foundation.<\/p>\n
Nevertheless, the fear in South Korea spread throughout Asia. Japan’s Nikkei 225 fell 3.6 percent and tech behemoth Softbank sank 15 percent. Most other Asian indexes were down more than 1 percent.<\/p>\n
Although tech stocks have been under pressure lately, they really haven’t dropped all that much: The Nasdaq is down about 5.5 percent from its record high set on 2 June.<\/p>\n
Stocks have been at or near record territory for most of the past couple of months. After President Donald Trump announced a ceasefire in Iran in April, the market largely moved on from the war and returned to a sharp focus on AI and the Fed’s interest rate policy.<\/p>\n
Case in point: Oil prices continued to fall a little on Tuesday, as traders cheered apparent progress in peace negotiations.<\/p>\n","protected":false},"excerpt":{"rendered":"Volatility has returned to the stock market, and AI is once again the culprit. The tech-heavy Nasdaq dropped…\n","protected":false},"author":2,"featured_media":492245,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[365,363,364,111,139,69,145],"class_list":["post-492244","post","type-post","status-publish","format-standard","has-post-thumbnail","category-artificial-intelligence","tag-ai","tag-artificial-intelligence","tag-artificialintelligence","tag-new-zealand","tag-newzealand","tag-nz","tag-technology"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/492244","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=492244"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/492244\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/492245"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=492244"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=492244"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=492244"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}