Tech Stocks Plunge Amid AI Spending Concerns

Tech stocks experienced a significant selloff on Tuesday as doubts about the value of AI spending and high valuations weighed heavily. The Nasdaq index fell over 2%, with key companies like Nvidia, Alphabet, and Micron seeing substantial drops. Among the biggest losers was chip maker Micron Technology, whose shares plummeted over 13%. This selloff reflects broader market jitters about whether the spending boom on artificial intelligence is justified.

Micron's stock has skyrocketed in value by nearly 800% in the past year due to soaring demand for memory chips from AI buildouts, showcasing the massive valuations for AI-related stocks. Analysts are watching Micron's earnings closely for signs of continued investment in AI.

Meanwhile, Barclays and Stifel raised their year-end targets for the S&P 500 to 7,800 on Tuesday, citing strength in corporate earnings. The target is about 4.4% higher than the index's last close. Barclays analysts noted that the equity bull case remains intact but emphasized the need for strong earnings and AI capital expenditure visibility as Federal Reserve support fades.

The S&P 500 has risen by 9.2% so far this year, driven largely by optimism around AI and a U.S.-Iran peace deal which boosted investor sentiment. However, rising inflation concerns and a robust labor market have sparked fears of potential rate hikes by the Federal Reserve that could impact equity performance.

Despite these bullish calls, concerns about massive AI budgets and consumer spending persist. Barclays maintained a 'negative' stance on the consumer space while upgrading healthcare to 'neutral'. The brokerage also lifted its S&P 500 earnings-per-share forecast for 2026 from $321 to $337. Micron's high-stakes earnings report outlined strong demand for its memory chips, which helped breathe life back into the AI-fueled rally. Investors shrugged off worries over valuations and demand, as Micron reported that customers had committed $22 billion to lock in supplies of memory chips.

The firm also indicated it does not have a sense of when memory supply will catch up with increasing demand. Global stocks slumped in a tech-fueled selloff, with investors unnerved by growing debt-funded AI spending, the prospect of a more hawkish U.S. rate outlook, and tightening financial conditions from a stronger dollar and higher U.S. bond yields.

The global tech shakeout intensified on Tuesday. South Korea's KOSPI sank 10%, the U.S. 'SOX' chip index fell 8%, and the S&P 500 tech subindex lost 4%. The Nasdaq's 2% decline meant the index lost almost $1 trillion in value.

SK Telecom announced a $481 million investment to acquire a 0.9% stake in SK hynix NAND Product Solutions, aiming to secure synergies with its AI business. This follows investments by SK Corp. and SK Innovation earlier this year and a $9 billion acquisition of Intel's NAND flash business by SK hynix in 2021.

SK Hynix is planning a $29.65 billion U.S. stock offering on the Nasdaq, with trading expected to begin as soon as July 10. The company aims to elevate its status as a global player and expand its investor base through this listing.