US stocks slide, as Wall Street gets AI wake-up call

Wall Street got a reality check as a bruising sell-off in several technology giants fuelled concern the artificial intelligence frenzy that has powered the equity bull market might be overblown.
The tech rout engulfed global stocks as worries about frothy valuations ignited a fresh bout of volatility after a nearly three-month surge in riskier assets.
The S&P fell 1.4 per cent. The benchmark index is coming off 11 weekly gains out of the last 12, led largely by technology stocks.
The Dow Jones Industrial Average, which is less influenced by tech stocks, gave up an early gain and closed just 0.1 per cent lower. The Nasdaq composite fell 2.2 per cent.
Losses were more pronounced in Asia, with South Korea’s Kospi plunging 10 per cent from a record. SpaceX climbed after briefly falling below its debut’s open price.
In a rush for safety, US Treasuries rose while haven currencies including the Japanese yen and the Swiss franc outperformed. Conversely, bitcoin lost 3 per cent. Oil dipped, with tankers becoming more overt in transiting the Strait of Hormuz after an interim peace deal between the US and Iran.

Tuesday’s equity pullback comes as the market prepares to close out the first half of the year with some blockbuster gains that had been driven by easing geopolitical tensions, solid earnings and an AI trade revival.
But the tech rally has recently faltered on concerns over whether the billions of dollars spent by giant firms will be justified.
“The risk-off trade reflects fear AI exuberance may be overdone,” Chris Low at FHN Financial said.
While warnings about tech euphoria are not new, the latest slide was triggered by amplified swings in the world’s best‑performing market this year. What started as a modest drop in South Korea morphed into a plunge that saw foreign investors offloading more than US$2.5 billion of Kospi shares.
Market watchers cited forced liquidation hitting retail investors trading on borrowed money, compounded by a wave of selling tied to leveraged exchange-traded funds tracking SK Hynix Inc and Samsung Electronics Co.
The volatility was centred on memory providers – an area that has accounted for the lion’s share of equity gains this year – as a local report signalled SK Hynix is redirecting its efforts towards cheaper products, noted Jose Torres at Interactive Brokers.
“It’s going to take quite a bit more weakness in the US market than we’re already seeing to raise any serious warning flags,” Matt Maley at Miller Tabak said.
“However, given the level of leverage in South Korea and around the world, investors should guard against being overly complacent.”

Attention will soon shift to Micron Technology Inc’s results on Wednesday, which are expected to provide the clearest test yet of whether demand for AI infrastructure remains strong enough to sustain this year’s rally.
Veteran strategist Louis Navellier said the report will be the grand finale to a “stunning” earnings season, noting that every dip should be viewed as a “buying opportunity”.
Tech giants will return to investor favour following a sell-off that has dragged down some of the biggest names in recent weeks, Evercore ISI’s Julian Emanuel said. Earnings will be “the proof of the pudding” after driving a “furious rally” in April and May, he said.
“The broader market remains supported by solid fundamentals,” Brock Weimer at Edward Jones said.
“However, we believe diversification remains key to managing risk, particularly after the strong gains in technology and other growth-oriented segments of the market.”
Additional reporting by Associated Press