Tech and chip stocks deepened their losses Tuesday – and SpaceX briefly dipped below its opening price – as investors panicked over Fed Chair Kevin Warsh’s recent surprisingly hawkish comments and a possible looming “AI bubble.”
The tech-heavy Nasdaq closed down 2.2% and the S&P 500 fell 1.4%, while the Dow Jones Industrial Average traded roughly flat.
SpaceX shares rose 1.5% to $156.11 a share. But the stock slid as low as $148.86 earlier in the day – below the opening IPO price of $150 – after falling 16% on Monday following reports it was planning a massive borrowing binge to fund its AI spending spree.
Kenin Spivak, chief executive of SMI Group, said this week’s tech rout could be a sign the market is bracing for a correction.
“Tech stocks are correcting for the irrational valuations and liquidity sucks coming from SpaceX and the next two mega-IPOs, OpenAI and Anthropic; cheap AI flooding the market from China; and general uncertainty about the future of tech,” he told The Post.
“Between government regulation, foreign competition, worker and student revolts and downward pressure on traditional tech, it’s time for some traditional metrics and risk reduction.”
Shares in Alphabet, Nvidia and Tesla on Tuesday fell 0.8%, 4.2% and 5.8%, respectively.
The iShares Semiconductor ETF plunged 7.9%, while chip-related stocks like Micron, Qualcomm, AMD and Intel fell 13.2%, 8%, 5.8% and 6.1%, respectively.
The State Street Technology Select Sector SPDR ETF slid 4.1%, while the VanEck Semiconductor ETF fell 7%.
“We think some of the reaction here is still unwinding from the Fed meeting and we are seeing subsequent moves in the dollar and risk assets alike,” Ken Mahoney, chief executive of Mahoney Asset Management, told The Post. “Banks, energy and value names are popping up as tech gets weaker so some of the reactions are clear, but of course can be subject to change.”
In his first Federal Reserve meeting as chairman last week, Warsh took a surprisingly tough, anti-inflation stance as the central bank flipped from an “easing bias” to expectations of an interest-rate hike later this year.
Now investors who were banking on lower interest rates are panicking over the possibility of higher ones, as well as heated inflation, after the Fed committee hiked their inflation outlook for the end of 2026 to 3.6%, up from 2.7%.
“We also just saw what we would essentially call systematic risk as markets overseas got slammed, and there has been too crowded of a trade and too much leverage that’s now coming undone,” Mahoney said – nodding to semiconductor ETFs, which have flown up over the past two months and are “going to have to unwind.”
Traders are already bracing for more declines in SpaceX, which made history as the largest-ever IPO and almost immediately shot up to a market cap above $2 trillion.
A ratio of put options to call options – or contracts signaling the right to sell versus the right to buy – tied to SpaceX jumped in recent days in favor of selling, which typically signals bearish sentiment, according to Cboe Global Markets data.
Some of the most actively-traded SpaceX contracts were tied to the stock falling to $120 to $100 a share, the data showed.
The global tech sell-off started Monday and picked up steam overnight as chip-related shares tumbled in Asia and Europe.
South Korea’s KOSPI led the nosedive, as South Korean chipmaker SK Hynix closed the session down more than 12%.
“Clearly this [downturn] will cause selling pressure and white knuckles for tech stocks in the US this morning as investors worry the overheated KOSPI sell-off has a spillover impact to US tech stocks,” Wedbush Securities analyst Dan Ives wrote in a note Tuesday.
“Taking a step back, we continue to believe that in this market we will continue to go through a number of ‘gut check moments’ in the tech trade as the AI Revolution remains in the 3rd inning … this morning is just another one of those moments.”
