Nasdaq 100 turns negative extending 2.2% Monday tech rout

The Nasdaq 100 reversed into negative territory Tuesday, extending a selloff that wiped 2.2% from the Nasdaq Composite as AI jitters spread from Seoul to Wall Street.

The Nasdaq 100 turned negative Tuesday, extending a 2.2% slide in the Nasdaq Composite as AI-chip demand concerns spread from South Korea.

"The SK Hynix report created concern about the pace of AI demand, triggering profit-taking in the semiconductor space that drove the majority of S&P 500 year-to-date gains," said Michael O'Rourke, chief market strategist at Jones Trading.

The S&P 500 Technology sector slumped 3.7% on Monday, while the Philadelphia Semiconductor Index cratered 7.9%. South Korea's KOSPI tumbled 10% in its second-biggest one-day drop after a report that SK Hynix is repurposing a production line scheduled for high-end AI HBM4 DRAM for general-purpose DRAM. The VIX edged up 2% to 16.78, signaling cautious positioning rather than panic.

The selloff raises questions about whether sky-high valuations in AI infrastructure stocks can be justified without tangible returns from massive capital-expenditure plans. With the Federal Reserve now pricing in two rate hikes this year instead of one, and the U.S. Dollar Index breaking out to a one-year high above 100, growth stocks face a double headwind from rising yields and a strengthening greenback.

AI Euphoria Meets Reality Check

The trigger for Tuesday's weakness traces to a ChosunBiz report that SK Hynix — a major beneficiary of the AI boom through its high-bandwidth memory chips — is shifting resources back to mainstream DRAM. The report sent SK Hynix shares down more than 12% and dragged Samsung Electronics lower by a similar margin, sparking a global rotation out of semiconductor and AI infrastructure names.

In the U.S., memory-chip makers bore the brunt. Sandisk and Micron Technology were the top percentage losers on both the S&P 500 and the Nasdaq, joined by Marvell Technology and Lam Research. CoreWeave fell 5% and Nebius Group dipped 1% on their Nasdaq 100 debut day Monday as traders sold into year-to-date gains of 65% and 243%, respectively. Alphabet dropped 5% and Amazon slid 4% as AI capital-expenditure concerns weighed on mega-cap growth names.

Retail enthusiasm had been peaking into the catalyst. Reddit sentiment for Nebius hit 95 — very bullish — on Friday, driven by a viral r/WallStreetBets post claiming the stock minted a millionaire in two years. Such peaks in retail euphoria into known catalysts often coincide with distribution, and the tape this week reflects that unwind.

Dollar Strength Adds Pressure

The macro backdrop has turned less forgiving for U.S. tech stocks. The U.S. Dollar Index reached a one-year high Tuesday, breaking out of a cup-and-handle pattern above the 100 resistance level and appearing headed toward 103, according to technical analysis. The rally began June 17, the day new Fed Chair Kevin Warsh gave his first press conference, emphasizing price stability and a reduction of the Fed's $6.7 trillion balance sheet.

Fed fund futures now point to two rate hikes this year instead of one, with the CME FedWatch tool showing a better than one-in-three chance of a hike at the July meeting. The U.S. 10-year Treasury yield has risen in response, amplifying pressure on richly valued growth stocks. CoreWeave trades at 10 times sales with deeply negative margins, while Rocket Lab carries a price-to-sales ratio of 99 times and a beta of 2.5 — the kind of names that feel selling pressure first when sentiment turns.

Investors will watch for whether the Nasdaq 100 stabilizes into the close, when passive index funds typically finish rebalancing. A late-day bounce could signal absorption of selling; continued weakness may suggest the unwind has further to run. Micron Technology's quarterly earnings, due later this week, will provide the next major test for the AI trade.

This article is for informational purposes only and does not constitute investment advice.