U.S. tech stocks experienced a sell-off yesterday, with doubts about AI returns and expectations of interest rate hikes jointly suppressing the chip sector

BlockBeats News: On June 24, U.S. technology stocks suffered another round of selloff on Tuesday. The Nasdaq Composite fell 2.2%, and the S&P 500 closed down 1.4%. Storage chip stocks were among the worst hit—SanDisk and Micron both pulled back by more than 13%, even though their year-to-date gains remain as high as 727% and 269%, respectively. The Nasdaq has now seen six consecutive trading days with daily volatility reaching or exceeding 1%.

This selloff was driven by two main concerns. The first is expectations for further rate hikes: Federal Reserve Chair Wash made clear last week that there is still a possibility of rate hikes this year to tackle inflation, and the market has already largely priced in two rate hikes during the year. The second is doubts about AI business models: some AI companies have begun to lower product prices, and combined with huge data-center construction spending, investors have been prompted to reassess the industry’s profitability.

Morgan Stanley Wealth Management’s Chief Investment Officer Lisa Shalett noted that AI models are becoming increasingly standardized, and users tend to choose the lowest-cost options, which will keep intensifying industry competition. As a result, related business models are becoming more cyclical and more sensitive to interest rates. She also revealed that her firm’s main brokerage unit—hedge fund clients—began proactively reducing risk exposure as of last week.

This round of adjustment has also spilled over globally. On Tuesday, South Korea’s Kospi index once fell by about 10% intraday, and retail leveraged trading is believed to have amplified market volatility. Notably, there was a clear split within the market: among the S&P 500’s 11 sectors, 6 closed higher. Consumer staples rose 1.8% and healthcare rose 1.4%. The Dow Jones Industrial Average fell by less than 0.1%, and defensive sectors overall performed relatively steadily.

Micron will release its earnings report on Wednesday, and the market is highly focused on whether its results can provide fundamental support for the chip sector.