US Stocks Fall as Global Tech Selloff Deepens

Key Takeaways

• US stocks fell on Tuesday as a global tech selloff extended into a second day.
• The declines follow a rally in AI-exposed stocks and several rounds of debt-based capital raising at large tech firms.
• Expectations that the Fed will raise interest rates later this year have weighed on stocks in recent sessions.

US stocks fell on Tuesday after global markets extended a major tech selloff that has hit some of the year’s biggest winners. The Morningstar US Market Index ended the day down 1.4%. The tech-heavy Nasdaq slid 2.2%, and the S&P 500 ended 1.4% lower, as markets faced a second day of selling amid concerns over surging tech stocks and frothy artificial intelligence valuations. The Morningstar US Technology Index fell 3.6%.

SpaceX SPCX shares recovered on Tuesday after falling more than 3% at the open. The stock shed $400 billion in market value on Monday, in its third straight session of losses. The newly listed stock ended the day at $156 per share, just above its first-day opening price of $150.

“I don’t think this correction is over. We had extremely crowded positioning, leveraged products, [and bullish] sentiment,” says Adam Turnquist, chief technical strategist at LPL Financial.

Alphabet shares fell 1% Tuesday after shedding 5% on Monday, their worst day in over a year, as the departure of two high-profile researchers added to mounting AI concerns. Fellow Magnificent Seven stocks Microsoft MSFT and Amazon AMZN opened in the red, recovering the day’s losses by close. Tesla TSLA fell 5.8%.

Morningstar senior equity analyst Javier Correonero says the sharp selling is likely profit-taking after market exuberance has pushed tech stocks to record highs this year. “There’s a lot of froth in the markets,” he adds.

Chipmakers Deepen Tech Rout

Meanwhile, chipmakers Micron MU and Intel INTC dropped 13.2% and 6.1% through midday, respectively, despite having been among the few technology stocks to close higher in Monday’s sectorwide selloff. Micron is due to report earnings on Wednesday.

South Korean chipmakers SK Hynix 000660 and Samsung 005930 each plunged 13% in Tuesday’s session, dragging the country’s KOSPI benchmark down 10% from its record high. Chinese equities in Hong Kong extended declines to enter bear market territory.

Tuesday’s retreat in chipmakers—key drivers of the AI equity rally—comes as investors begin to question whether the sector’s future returns can justify current bumper spending. Record debt issuance from hyperscalers such as Amazon and Alphabet GOOG/GOOGL adds a layer of risk as big tech borrows to fund the AI infrastructure buildout. Vanguard portfolio manager Thanh Nguyen notes that as the AI infrastructure boom took off last year, hyperscaler debt jumped to $93 billion from an average of $28 billion per year in the United States. The pace has only accelerated in 2026, and Nguyen says hyperscalers have only raised about half the funding they need this year.

Meanwhile, hawkish commentary from new Federal Reserve chair Kevin Warsh last week suggests an interest rate hike could be likely before the end of the year, potentially hampering the costly AI buildout.

The AI Rally Cut Short?

Tech stocks have rallied to record highs this year, as enthusiasm around the AI trade has largely provided a buffer to other geopolitical and economic risks. Major AI infrastructure announcements by US tech firms have helped fuel that enthusiasm. But as those hyperscalers increasingly seek external sources—including debt and equity markets—to pay for those mammoth plans, concerns have emerged over funding circularity within the sector and concentration risks.

“We’re increasingly seeing questions about who can stay at the frontier of AI,” says Neil Wilson, UK Investor Strategist at Saxo. “It looks like bulls are pulling in their horns ahead of the Micron earnings, which is reading across the entire AI play and taking some froth off the top, with SpaceX’s tumble starting to look a concern and yet another debt raise demanding whether these firms have the cash to continue investing.” However, he suggests the pullback is likely more a symptom of the revised US interest rate outlook than a rethink of the AI trade. He adds that a Fed rate hike could now be on the table as soon as July.

“Ultimately, this is probably more of a reset against a higher rate outlook than a precursor to anything apocalyptic,” Wilson says.

LPL’s Turnquist believes the decline doesn’t imply the tech or AI trade is over, although “you should expect downside volatility as profit-taking pressures come into play.”