U.S. chip stocks fell from record highs on Tuesday, but the broader market’s initial slump brought out bargain-hunting investors, stemming the falloff in other companies central to the AI infrastructure rally that have powered the market over the last few years.
The tech-heavy Nasdaq Composite index was still down 1.7%, wiping out around $776 billion in market value on Tuesday. Elon Musk’s SpaceX briefly traded below $2 trillion in market cap for the first time since its debut earlier this month before rebounding into positive territory.
SpaceX’s record-breaking IPO fueled a trading frenzy in its first week as a listed company, but shares have unraveled in the past few trading sessions, erasing more than $600 billion in market capitalization since last Wednesday.
Tech has endured its first major selloff in weeks over the last several days, with the Nasdaq off by nearly 5% from its peak close from early June. The world’s most valuable company, Nvidia, saw its market cap slip below $5 trillion with a 3.4% decline. It and Tesla TSLA.O were among the biggest drags on the Nasdaq.
Chipmakers, which have been among the biggest winners of the AI trade this year, clocked heavy losses, with the Philadelphia SE Semiconductor Index down 7.5%. Micron, one of the biggest gainers in recent months, was down 10.8%. It will report earnings after the markets close on Wednesday.
“The trade has been highly concentrated and flow-driven, which makes it vulnerable to relatively small shifts in sentiment,” said Ross Mayfield, investment strategy analyst at Baird.
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“It doesn’t appear to be closely tied to the fundamentals of the AI story, but rather to the heavy concentration and strong inflows into global tech over the past few months now starting to unwind.”
Memory chipmakers — the best-performing stocks on the S&P 500 so far this year — lagged on Tuesday, with SanDisk falling 12.4% and Western Digital losing 8.4%. Memory chipmakers in South Korea also recorded steep declines.
SpaceX shares were up 3.3% at $159.7 just after 11:57 a.m. ET, after falling as low as $147.11, its first slip below its opening-day price of $150.
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High-flying SpaceX stock comes back to Earth -
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Elon Musk becomes world’s 1st trillionaire after massive SpaceX IPO -
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SpaceX taking “the fiction out of science fiction,” Musk says at historic Wall Street debut -
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NASA unveils crew of Artemis III mission to test new moon landers -
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SpaceX launches upgraded Starship on debut test flight
TECH GIANTS MIXED
- Calgary Transit unveils new light rail vehicles that go into service this week
- These are the 15 most affordable cities in Canada, Royal LePage says
- Alberta nixes booze price hike after premier, Calgary mayor snipe at each other
- Alberta government expects $100 payouts to arrive within 2 weeks of applications
Other tech heavyweights were mixed, with Alphabet off 1.1%, Apple up 0.3%, and Microsoft up more than 1%. Software stocks like Workday and Salesforce were also higher; those shares sold off heavily earlier this year on AI-linked fears.
Commonly dubbed hyperscalers, these firms have committed billions to ramp up their AI infrastructures, though clearer evidence that AI products can generate returns justifying the spending remains elusive.
Lauren Hyslop, investment manager at Mattioli Woods, said the selloff was due to a more challenging interest-rate backdrop and concerns about the scale of capital required to fund the next phase of AI investment.
“I’d be cautious about seeing this as a second-chance buying opportunity. The drop looks dramatic in scale, but these swings aren’t unusual for a stock with such a small public float,” said Nic Puckrin, cross-asset analyst and founder of Coin Bureau.
The company’s shares are still more than 10% above their IPO price of $135. SpaceX also announced a bond offering earlier this week.
Big IPOs often face turbulence in their early days on the public market. A Reuters analysis of 50 IPOs with the highest valuations in the past five years showed investors would have been better off buying an S&P 500 index fund about three-quarters of the time than buying into a big IPO.
Rate-sensitive technology stocks have also been hurt by expectations of tighter monetary policy under U.S. Federal Reserve Chair Kevin Warsh, especially as recent economic data points to a resilient economy.
“SpaceX stock value drops $600B in 3 days”
Shades of Bre-X and the South Seas ‘bubble’, a fool and their money are soon parted.
There really isn’t any news here. AI trade cooled off today and semiconductor stocks retreated. Up and down. The market does that. And SpaceX gained 1% today net.
I guess that’s why this story was pulled from the website’s mainpage.
It was over valued by 150% on purpose so he could pay back all the investers he still owed for his Tesla stock and his Twitter debacle. Wish it would only be the high rollers who get hurt but it will be all the pension plans, small traders, Mom & Pop retirement funds etc who will be left holding the bag when it drops to where it should actually be. This company everybody claims is worth so much money has lost over 41Billion dollars since it was created in the rebrand after Elon bought it from the people who actually did all the work.
Yet another “pump and dump.” When will “investors” (aka “suckers”) figure out that this is how the rich get richer.
Pretty standard with new listings
Was never even considered newsworthy until it was one of Musks companies
Thats kinda common with niche investments. Once the hype dies down, it drops back to something resembling a reasonable valuation.
At the end of the day, there are only about 300 or so launches into orbit per year…globally.