AI Stock Selloff: Nasdaq Down 2.2 Percent as South Korea Kospi Triggers Circuit Breaker

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Markets took a sharp tumble on Tuesday with the tech-heavy Nasdaq dropping 2.21 percent and the S&P 500 falling 1.44 percent as investors sold semiconductor and AI-related stocks. The broader story started in Asia where nerves about AI valuations spiralled into full panic in South Korea, with the Kospi index dropping 10 percent and triggering a circuit breaker that caused a 20-minute halt in trading. Samsung fell dramatically before recovering on Wednesday with a 7 percent surge, suggesting Tuesday's move was an overshoot.

The semiconductor names led the losses in the US. Micron dropped 13 percent, Marvell sank 9 percent and Nvidia fell around 4 percent. Oracle fell more than 5.5 percent putting it down around 27 percent for the month. Google was relatively flat while SpaceX actually gained about 1 percent after fluctuating through the session. The market had been at or near record territory for most of the past two months and this correction came off the Nasdaq's all-time high set on June 2nd.

Two factors are being cited for the selloff. AI valuation concerns are the main driver as investors are starting to question whether the extraordinary multiples being paid for AI-adjacent companies are justified by near-term revenue reality. The second factor is the new Fed Chairman Kevin Warsh signalling at his first press conference that the Fed will stay focused on fighting inflation and may raise rates later this year, which investors read as a negative for growth stocks.

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