SpaceX leads AI-linked selloff, drags Nasdaq futures 2% lower
- The yield on the short-term 2-year Treasury note slipped about 4 bps to 4.19%, after touching a four-month high on Monday
US tech stocks, led by Nasdaq, fell amid concerns over imminent Federal Reserve rate hikes and high valuations for AI-related companies, impacting global markets.
- Imminent Federal Reserve interest rate hikes.
- High valuations and increased borrowing costs for AI stocks.
- Declines in major tech companies including SpaceX and Alphabet.
Contracts tracking the tech-heavy Nasdaq fell 2%, leading declines among Wall Street futures on Tuesday, as concerns around imminent rate hikes in the United States and debt-backed corporate spending on AI weighed on investor sentiment.
Stocks across the globe, including those in Europe and Asia, came under pressure following a selloff on Wall Street in the previous session, while crude oil and precious metals also fell.
The weakness in U.S. artificial intelligence-related stocks is likely to persist as investors worry about ballooning valuations at a time when elevated borrowing costs could make AI spending more costly.
At 03:33 a.m. ET, Dow E-minis were down 372 points, or 0.71%, S&P 500 E-minis were down 101.25 points, or 1.34%, Nasdaq 100 E-minis were down 693.25 points, or 2.25%.
Traders expect the Federal Reserve to hike borrowing costs by a total of 50 basis points by December, according to the CME Group’s FedWatch Tool, up from one 25 basis point hike two weeks ago, as investors price in hawkish monetary policy under new Chair Kevin Warsh.
S&P 500, Nasdaq fall as megacap tech drags
The yield on the short-term 2-year Treasury note slipped about 4 bps to 4.19%, after touching a four-month high on Monday.
Investors have been concerned about elevated valuations of AI-related stocks following a strong rally earlier this quarter in the aftermath of the Middle East ceasefire.
Chip stocks advanced on Monday, with the Philadelphia SE Semiconductor Index hitting a record high. Micron’s results on Wednesday could offer some clues into the outlook for memory and AI chips.
Elon Musk’s SpaceX was the latest megacap to turn to the bond market, following a blockbuster IPO earlier this month, despite logging net losses the year before. The stock lost 16% on Monday, while shares of Alphabet , Meta, Microsoft and Amazon also fell sharply.
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