The stock exchange that was one of the best in the world gave the signal for chaos in the markets

Nasdaq futures fell by 2.4%, the S&P 500 lost 1.4%, and chip stocks on Wall Street fell by about 6% in early trading, and in particular, memory chip stocks led the declines, led by Micron and SanDisk. Sharp declines were also recorded in Asia this morning, with the South Korean Kospi index falling by 10%.

What led to the sharp declines in stocks that were at the forefront of the unprecedented rally driven in recent years by artificial intelligence? Globes is in order.

What happened to trade in Asia?

The shares of the memory chips were in focus today (Tuesday). This morning in South Korea they fell sharply, with the Cospay index losing 10%, led by the country’s largest chip manufacturers, which make up 40% of the index.

Shares of SK Hynix, which only temporarily ousted Samsung as South Korea’s biggest company on Monday, led the wave of declines in the local market, as investors cashed in on stocks that benefited from the artificial intelligence boom. Both fell today by more than 12%.

“The movement in the market seems to reflect a situation where South Korean chip stocks rose too quickly and too strongly, which led to aggressive selling by foreign investors as well as domestic institutions,” said Joo Won, head of the economic research division at the Hyundai Research Institute, to the AFP agency. “It is possible that the sale reflects the beginning of a broader process of reducing positions by investors. In other words, it is possible that there is still significant selling pressure waiting in the market.”

“Since many investors made substantial profits during the rally, some may prefer to take profits now and re-examine the market later,” Wen noted.

In May, the South Korean stock market led the returns in the world. The Kospi index led with a dollar jump of 28.5% (and 26% in the local currency). Since the beginning of the year, the index recorded a return of 101%, completing a jump of no less than 230% in the last three years. The two stocks that fell this morning – SK Hynix and Samsung – were the main engine of the South Korean index last month.

Why are technology and chip stocks falling?

Chip stocks have been at the forefront of the AI-driven rally, so they are also the first to be hit when there are doubts about the rate of growth in demand or pricing. In addition, it is a very cyclical sector, sensitive to changes in price expectations and demand. Thus, behind the declines there is a combination of events and “peak weather” that caused profits to be realized, fears that the huge investments of the cloud companies will not yield sufficient returns, and a sharp decrease in “risk appetite” in the global markets.

Today’s declines come after the sharp realizations recorded in the major technology stocks in the US yesterday (Monday), against the background of doubts that arose among investors regarding the ability of the cloud giants. This began inAlphabetical which fell 5% and recorded its worst trading day in more than a year, amid growing fears of a “brain drain” after two high-profile senior artificial intelligence researchers left the company in favor of competitors. In addition, investors continued to exit yesterday from additional “Magnificent Seven”. stock Amazon fell by almost 5%, while a share Meta lost 2%.

At the same time, the euphoria of the issuance of SpaceX Continues to fade: the stock has completed a drop of more than 30% within a week from the peak, and is trading close to its opening price on the first trading day – $150. Yesterday the stock fell by 16% and recorded a value write-off of $400 billion – the second highest figure ever (in first place is Nvidia, which lost $593 billion in one trading day in January 2025).

The stock is now down more than 2% in early trading after recording a consecutive Tuesday of declines. The latest realizations erased more than 30% of its value since the peak recorded on June 16, when it traded at a price of $225.64 per share.

Rodrigo Catril, a strategist at National Australia Bank in Sydney, said that “the market seems more concerned about the weakness recorded tonight among the American technology giants, and less focused on the positive side of the drop in oil prices. There is definitely a tendency to avoid risk in the air.”

“This is a helpful reminder that these are still cyclical and opportunistic businesses,” said Amanda Linus, director of research at Energy Group Capital. “The real test will be Micron’s reports tomorrow. I would monitor the rate of change in memory prices as well as any changes in the capital investment forecasts (CapEx).”

Why are micron reports important?

Micron is expected to publish its financial reports for the third fiscal quarter of 2026 tomorrow, and the expectations on Wall Street are sky high. In the market, it is estimated that Micron’s reports will be an important test for the entire chip sector, while the sentiment in the markets has become more cautious, with investors focusing on the weakness of technology stocks and meanwhile ignoring the positive effect of the drop in oil prices.

Driven by relentless demand for memory chips for artificial intelligence (AI) infrastructures and high-bandwidth (HBM) chips, the company recently crossed a historic $1 trillion market cap. The analysts expect a meteoric jump of about 276% in revenues to the level of about 34-35 billion dollars, alongside a projected profit per share (EPS) of about 19 to 21 dollars – a jump of almost 1,000% compared to the corresponding quarter last year.

Investors will closely monitor the gross profit rate, which is expected to climb to the 81% region, and the company’s forecasts for the rest of the year, considering that its production capacity for HBM for 2026 is already completely sold out. The report is expected to dictate the sentiment in the chip sector as a whole. If he does not live up to expectations, he may lead to a worsening of the declines in chip stocks.

Is there a broad change in investor behavior?

According to some market strategists, retail investors are still exposed to AI, but more through ETFs and less through individual stocks, which reduces momentum in specific stocks and increases spot volatility.

“All things related to AI and technology are still at the center of interest for individual investors. They’re just less active in individual stocks than they were in the past,” said Liz Saunders, chief investment strategist at Charles Schwab, in an interview with CNBC.

“This is not a decline in interest in the technology sector or in the field of artificial intelligence more broadly, but rather a change in the investment tools that investors use. In my opinion, there is currently a growing preference for ETFs over trading in individual stocks.”

How do expectations for interest rate hikes in the US affect?

According to Bank of America, high and stubborn inflation and an aggressive (hawkish) tone from the new chairman, Kevin Warsh, will lead the Federal Reserve to raise interest rates three times this year.

In the review they published on Monday, the bank’s economists reversed their position, which they held only last week, according to which the central bank will refrain from changing the interest rate this year. But after examining current conditions and Warsh’s statements last week, that outlook has changed.

The bank expects that a report to be published later this week regarding the core price index of private consumption expenditure (Core PCE) – the Fed’s main inflation forecasting tool – will show an annual rate of 3.5%, reflecting the impact of protective tariffs and other one-time price increases. Ultimately, this may lead to an increase of 75 basis points, or three-quarters of a percent, in the central bank’s central lending rate (benchmark rate).

The increase in interest rates will lead to an increase in bond yields. This combination is a weight for the stock market, as it raises the alternative cost on the one hand, and shrinks the pricing of companies (through cash flow discounting) on ​​the other hand.