US AI stock sell-off shakes markets from Wall Street to Asia

[groundloop]

This discussion thread was locked as off-topic by Omaha Steve (a host of the Latest Breaking News forum).

Source: The Guardian

A tech sell-off shook global markets on Tuesday as attention turned away from developments in the US war with Iran and toward the future of AI companies and chipmakers that have driven stock markets to record highs.

The tech-heavy Nasdaq index opened 2% lower on Tuesday. The Dow and S&P 500 were also down at opening.

All three major US indices have hit record highs this year, riding off a rush of funding to support AI technology and infrastructure. Nasdaq is up 10% for the year, while the Dow jumped 6% so far this year, breaching past 51,000 points, and the S&P 500 is up 7.3%.

But some economists have warned that the influx of AI spending is a bubble reminiscent of the dot-com bubble that burst in the early 2000s. Seven tech companies make up 30% of the S&P 500’s value.

Read more: https://www.theguardian.com/business/2026/jun/23/ai-stocks-sell-off-us-markets

[paleotn]

1. Beat me to it. Here we go, folks.

Whether or not this will initiate panic selling now remains to be seen. Usually these things drift in a series of relatively small corrections before it really tips over. But when the panic contagion finally hits, it hits hard. The 2008 collapse started quietly in 2006 / early 2007, as cracks appeared in the hyped narrative of "housing prices always go up up up!!". Equity markets recovered by end of 2007, only to go back into volatility territory in early 2008. The drift downward continued until the bottom fell out with the Sept. 2008 crash.

It was all fun and games when the tech bros were burning their own excess cash on AI dreams. When they started taking out gargantuan amounts of debt, stocks lost all sense of reality, and IPOs started based on smoke, mirrors and handwaving, we entered the....bubble zone. And bubbles always correct. Sometimes violently. The question no one can answer is when.

[pat_k]

3. How the end begins

In addition to the fragility created by the giant percentage of the value of the S&P accounted for by just 10 companies, we also have the fragility created by the obscene concentration of wealth.

How Does the End Begin?
https://www.profgalloway.com/how-does-the-end-begin/

The top 10 stocks in the S&P 500 account for 40% of the index’s market cap. Since ChatGPT launched in November 2022, AI-related stocks have registered 75% of S&P 500 returns, 80% of earnings growth, and 90% of capital spending growth. Meanwhile, AI investments accounted for nearly 92% of the U.S. GDP growth this year. Without those AI investments, Harvard economist Jason Furman noted, growth would be flat. As Ruchir Sharma concluded in the Financial Times, “America is now one big bet on AI,” adding, “AI better deliver for the U.S., or its economy and markets will lose the one leg they are now standing on.” This concentration creates fragility, and how the end begins becomes more visible.
...
If Mag 10 valuations are cut in half, the S&P and global markets would decline by 20% and 10%, respectively. In the U.S., the immediate impact would be felt by the wealthiest 10%, who own 87% of the stocks. Those households won’t struggle to pay their bills, but they may be the tail of the whip on the economy, as wealthy households have the luxury of decreasing their spending dramatically, vs. middle-class households, who spend the majority of their income on basics. If the top 10%, who account for half the consumer spending in the U.S., hit the brakes, the nation gets whiplash. I estimate that if the wealthy see their portfolios drop by 20%, we could see a 2-3% decline in GDP. For context: From peak to trough, the Great Recession registered a 4.3% drop in GDP.

[PSPS]

2. TIme for the early investors to cash out after the bump, leaving the "new investors" holding the bag.

Adios, suckers!

[Omaha Steve]

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