AI chip stocks plummet and revaluation of crypto assets: Why does the market diverge after $2.3 trillion evaporates in the US stock market

On June 5, 2026, the U.S. Bureau of Labor Statistics released a non-farm employment report that became the catalyst for a sharp correction in global risk assets. Data showed that U.S. non-farm employment increased by 172k in May, far exceeding market expectations of 88k, while revisions for March and April added a total of 93k jobs, pushing employment growth over the past three months to its strongest performance in more than two years. Against the backdrop of an unemployment rate steady at 4.3%, this "blowout" employment data surpassed nearly all mainstream forecasts.

The rate futures market responded immediately. Traders quickly priced in about 24 basis points of rate hikes before the October Federal Reserve meeting, with expectations of a total increase of approximately 41 basis points by the end of April next year. Just a week earlier, the market had priced in the first rate hike in March next year. The 10-year U.S. Treasury yield briefly rose to 4.55%, and the dollar index surged past 100. The Nasdaq Composite plummeted 4.18% that day, marking its largest single-day decline since April 2025; the S&P 500 fell 2.64%, ending nine consecutive weeks of gains; and U.S. equity market capitalization shrank nearly $2.3 trillion overnight. This was the most severe single-day sell-off since 2026 and marked a new phase in the market’s re-pricing of the Federal Reserve’s policy path.

Why the AI chip sector experienced the deepest declines during the sell-off

Amid the broad decline across the three major indices, the AI chip sector’s fall was particularly striking. The Philadelphia Semiconductor Index (SOX) closed down 10.26%, its largest single-day drop since March 2020, with the sector’s overall market value evaporating over $1.2 trillion. Nvidia’s stock fell 6.2%, with its market cap shrinking by about $328 billion in a single day, bringing its latest valuation to approximately $4.96 trillion. Broadcom declined nearly 19% over two days, Micron Technology dropped over 13%, AMD fell close to 11%, and Marvell Technology declined over 16%.

This sharp decline was not solely driven by macro rate hikes. Micro-level chain reactions were equally critical: Broadcom’s recent earnings report showed that demand for its custom AI chips failed to meet high market expectations, causing its stock to plunge sharply over two days. Meanwhile, research firm SemiAnalysis released a report suggesting that Nvidia’s next-generation flagship rack memory capacity might be below previous expectations. Although Nvidia CEO Jensen Huang quickly denied these rumors, market interpretation of this signal had already taken hold. The confluence of multiple negative signals prompted investors to accelerate the retreat from AI-related positions amid macro pressure from rate hike expectations. Mark Hackett, Chief Market Strategist at Nationwide, observed that investors had "already had their finger hovering over the ‘sell’ button"—after prolonged excess gains, structural deviations in positions made locking in profits a rational choice.

The transmission logic of high valuation re-pricing in tech stocks under rate hike expectations

This plunge exhibited a clear macro transmission chain: unexpectedly strong non-farm data → rising rate hike expectations → surge in U.S. Treasury yields → systemic sell-off of high-valuation tech stocks. This pathway has a tight internal logic at the asset pricing level—when risk-free rates (represented by Treasury yields) rise significantly, the discount factors for risk assets undergo systemic changes, with high-growth, high-valuation tech stocks being most affected.

From an industry structure perspective, the May increase in employment was highly concentrated in leisure hotels, government, and education/health sectors, which together contributed 94% of the new jobs. This indicates that the structural features of employment expansion may not support sustained full-sector tightening policies, but the market’s digestion of this detail was limited—funds, facing uncertainty, preferred to retreat from the most overvalued sectors. Several institutional analysts pointed out that this correction in equity markets was a re-pricing of the crowded AI capital expenditure theme, rather than a breakdown of broader index upward trends. Ohsung Kwon, Chief Equity Strategist at Wells Fargo, also noted that the semiconductor sector had been extremely overbought, and a correction was not surprising, nor did it signal the end of the semiconductor bull market. Regardless of institutional qualitative judgments, the self-fulfilling nature of market sentiment-driven capital flows had already completed its price adjustment.

Does a genuine structural linkage exist between the crash in AI stocks and the crypto market?

During the same period of sharp declines in U.S. equities, the crypto market also experienced intense downward pressure. In the week of June 6, 2026, Bitcoin’s weekly decline was about 17.3%, and Ethereum’s was approximately 22%, both marking their largest weekly drops since the FTX collapse in November 2022. The total crypto market cap evaporated roughly $390 billion that week, with about $7 billion of leveraged positions forcibly liquidated. The U.S. Bitcoin spot ETF saw net outflows of around $2.7 billion during the week ending June 5, continuing a multi-day outflow trend.

Greg Cipolaro, Research Director at NYDIG, assessed that this was not caused by a single event but was the result of multiple stress factors accumulating simultaneously. Notably, the shift of funds from crypto assets into AI and tech sectors was identified as a significant background factor. His analysis pointed out that the overlap between AI and crypto investors is higher than generally perceived—both attract capital seeking emerging tech and high returns. As AI-themed stocks continued to outperform, institutions naturally reduced crypto holdings to free up cash for potential tech IPO participation. Therefore, there is indeed a structural capital competition linkage between crypto and AI stocks, rather than just a mirror image of market panic sentiment.

The unique recovery path of crypto assets after short-term synchronized pressure

However, after experiencing synchronized pressure, the crypto market showed differentiated recovery characteristics over the following days. By June 8, 2026, Bitcoin’s price rebounded successfully, with a 24-hour increase exceeding 5%, recapturing the $63,000 level. According to Gate.io data, BTC/USDT was around $63,000, and Ethereum also recovered above $1,600. The total market cap rebounded from its lows by about $150 billion, returning to roughly $2.2 trillion. The Fear & Greed Index moved up from the extreme fear zone into a low but less extreme range, reflecting a typical “emotion bottom + price recovery” mismatch.

This rebound path was markedly different from the trend in the AI sector of the U.S. stock market. While macro rate hike expectations directly impacted crypto declines, the fundamental valuation framework of crypto assets differs structurally from tech stocks: crypto valuations rely more on on-chain ecosystem development, institutional adoption, and regulatory narratives, rather than corporate earnings and valuation multiples. Once macro shocks are short-term digested, the market begins to reprice crypto assets based on their independent fundamentals. Additionally, in the context of risk-off sentiment triggered by U.S. and Korean stock circuit breakers, crypto demonstrated relative resilience in this correction—despite not being a traditional “safe haven,” its self-correction speed was faster than many traditional risk sectors.

Divergence in AI outlook and the long-term narrative of crypto: what explains the valuation logic differences?

At critical junctures following the crash, the core narratives of the two asset classes diverged sharply. Nvidia CEO Jensen Huang, speaking in Seoul amid the global tech stock plunge, publicly stated that AI infrastructure development was “just getting started,” and the recent decline was essentially a “discount sale,” encouraging investors to buy at a discount. His core view is based on the long-term trend that AI will become a global core infrastructure, similar to the internet. Meanwhile, the Korean KOSPI index plunged as much as 8.8% and triggered a circuit breaker, marking the second primary circuit breaker this year. Samsung Electronics and SK Hynix both opened down nearly 10%, exposing the fragility of chip stock valuations and high leverage. Goldman Sachs analysts forecast a rebound in Korean stocks after the circuit breaker, which also points to the long-term existence of structural AI demand.

In contrast, the narrative reconstruction in crypto occurred at the intersection of capital rotation and regulatory developments. Progress in policies like the U.S. strategic Bitcoin reserve, the legislative advancement of the CLARITY Act in the Senate, and ongoing signals from the Trump administration on digital asset policies are providing long-term valuation anchors independent of macro rates. The valuation logic of these two asset classes is becoming increasingly distinct: AI stock valuation adjustments are highly linked to earnings realization and discount rate changes, while crypto market volatility remains intertwined with macro liquidity, regulatory shifts, and on-chain ecosystem development.

Projecting the medium- to long-term valuation anchors of the crypto sector from liquidity and regulation perspectives

Looking ahead from the current point, the core variables for medium- to long-term crypto valuation will still stem from two levels. On the liquidity front, the Federal Reserve’s policy statement during the June 16–17 meeting—its first under new Chair Kevin Woor—will directly influence expectations for the rate path in the second half of the year. If rate hike expectations intensify, high-interest-rate environments will exert ongoing pressure on leveraged crypto assets; if inflation signals cool down, the over-traded rate hike expectations may reverse and provide room for correction.

On the regulatory front, the legislative process for the CLARITY Act is entering a critical window. The bill aims to clearly delineate the regulatory authority over crypto assets between the CFTC and SEC, ending years of regulatory ambiguity. The ongoing push by the Trump administration for a “forward-looking” digital asset market framework, along with the implementation of the strategic Bitcoin reserve policy, provides institutional backing for crypto assets. This structural factor has never appeared in previous cycles, and its weight in market pricing is expected to increase. Historically, increased regulatory certainty tends to create positive feedback for long-term institutional capital inflows—an effect currently absent in the AI narrative.

Summary

The panic triggered by the U.S. May non-farm payroll data exceeding expectations on June 5, 2026, led to a global risk asset re-pricing storm. U.S. market cap evaporated by $2.3 trillion overnight, the Philadelphia Semiconductor Index experienced its largest single-day decline in six years, the KOSPI plunged 8.8% triggering a circuit breaker, and the crypto market was under pressure, experiencing its largest weekly decline since the FTX collapse. Behind the short-term synchronized declines, macro rate hike expectations and micro-positioning factors intertwined to form a complete downward logic chain.

However, while AI stock valuations are still digesting the correction, the crypto market led a recovery starting June 8, with Bitcoin quickly rebounding past $63,000. This divergence reflects the fundamental differences in valuation frameworks: AI stocks depend heavily on earnings realization and discount rate changes, whereas crypto volatility is always intertwined with macro liquidity, regulatory policy shifts, and on-chain ecosystem development. Over the long cycle, the advancement of the U.S. strategic Bitcoin reserve and the CLARITY Act are providing unprecedented institutional valuation anchors for crypto assets. Whether this structural factor can truly hedge against the headwinds of high interest rates will be a key variable to watch in the second half of the year.

FAQ

Q1: Does this AI stock crash mean the “AI bubble” has officially burst?

Mainstream consensus tends to view this crash as a severe valuation correction and profit-taking, rather than the start of a systemic bear market. Wells Fargo believes the semiconductor sector was previously extremely overbought, and a correction was not surprising. Jensen Huang also emphasized that AI infrastructure development “is just beginning,” and sees the decline as a short-term fluctuation based on long-term trends. Nonetheless, the future trajectory of AI stocks will still depend on earnings validation and capital expenditure realization.

Q2: Why did Bitcoin rebound so quickly after the AI stock plunge?

Three factors jointly drove the rapid recovery: First, the crypto market had already largely absorbed leverage risk during the decline, with about $7 billion of leveraged positions liquidated, releasing selling pressure; second, although rate hike expectations remain, the market, after digesting the peak panic on June 8, began to reprice the independent fundamentals of crypto assets; third, policy developments like the U.S. Bitcoin reserve and strategic Bitcoin reserve establishment provided institutional backing, creating a differentiated valuation path from AI stocks.

Q3: Will rate hike expectations continue to suppress crypto assets?

Rate hike expectations do influence crypto markets. High interest rate environments impact leverage and liquidity-sensitive assets’ pricing. However, the crypto market has already front-loaded some of these expectations, and regulatory narratives and institutional adoption are forming hedging forces. The key to future judgment lies in whether inflation data cools or the Fed adopts a dovish stance—if so, over-traded rate hike expectations could reverse and allow for recovery.

Q4: Has the structural relationship between crypto and U.S. stocks changed?

Since early 2026, the correlation between crypto assets and the Nasdaq has shown signs of loosening. Crypto is no longer viewed solely as “leveraged Nasdaq,” and its volatility exhibits more alternative attributes influenced by macro liquidity. The correction and recovery in crypto after the AI stock plunge further confirm this trend: the valuation logic is shifting from “synchronous linkage” toward “partial decoupling,” with capital allocation behaviors becoming more complex across asset classes.