Nasdaq falls for fourth straight day, tech sell-off spreads: AI bubble burst or healthy correction?

Eastern Time June 25 (Beijing Time June 26), the U.S. tech sector once again faced a severe selloff. Apple (AAPL) closed sharply down 6.12%, marking its largest single-day drop since April 2025; Microsoft (MSFT) fell 3.46%, Amazon (AMZN) dropped 3.10%, Meta (META) declined 2.65%, Nvidia (NVDA) slipped 1.64%, Google (GOOGL) fell 0.83%, and Tesla (TSLA) edged down 0.11%. The "Magnificent Seven" all ended in the red, with the Wind U.S. Tech Seven Giants Index dropping 2.75% in a single day.

The Nasdaq Composite Index fell 0.46% to 25,358.60 points, declining for the fourth consecutive trading day, marking the index's first four-day losing streak since February this year. The S&P 500 Index edged down 0.01% to 7,357.49 points; the Dow Jones Industrial Average bucked the trend, rising 0.14% to 51,920.62 points.

A starkly contrasting market trend is unfolding: tech giants are collapsing across the board, while memory chip stocks are surging collectively. Micron Technology (MU) closed up sharply by 15.74%, Western Digital (WDC) surged 21.97%, and the Philadelphia Semiconductor Index rose 3.59% against the trend. Why does the logic of "sell tech giants, buy chip stocks" hold simultaneously within the same time window? Is this selloff a precursor to the burst of the AI bubble, or a healthy valuation correction?

Why the Tech Giants Are Being Sold Off Collectively in the Same Time Window

The selloff on June 25 was not an isolated event. Over the past week, tech stocks have been under sustained pressure, with the Nasdaq falling for four consecutive trading days. The triggers for this decline are multifaceted rather than driven by a single event.

The most direct catalyst comes from price transmission in consumer electronics terminals. Apple announced global price increases for Mac, iPad, and multiple hardware products, with increases of up to $300—the company's largest global price adjustment in recent years. Apple CEO Tim Cook stated that due to sharp fluctuations in memory and storage market prices, product price hikes were unavoidable—AI-driven demand has disrupted the original supply-demand balance, and Apple can no longer rely on procurement scale advantages to secure preferential pricing. Microsoft similarly announced price increases for Xbox game consoles on the same day, citing rising costs for key components as the reason.

The price hike news directly impacted market expectations for tech giants' profit margins. When terminal price increases become a passive choice rather than active pricing power, it implies that cost-side pressures have become too great to be absorbed internally. Carol Schleif, Chief Investment Officer at BMO Family Office, pointed out: "The market is beginning to realize that a company's impressive revenue and profit performance means the other end of the supply chain is bearing corresponding costs."

Deeper pressure comes from the macro level. Data released by the U.S. Department of Commerce showed that the Personal Consumption Expenditures (PCE) price index—the Fed's preferred inflation gauge—rose 4.1% year-over-year, the highest level since April 2023. Core PCE rose 3.4% year-over-year, also the highest since October 2023. Against the backdrop of resurgent inflationary pressures, traders expect the Fed to raise interest rates by at least 25 basis points before the end of the year. The logic of rising rate expectations suppressing high-valuation tech stocks is clear: a higher discount rate means lower present values for future cash flows, while the relative attractiveness of low-risk assets like Treasuries increases.

Why Memory Chip Surges and Tech Giant Crashes Happen Simultaneously

This is a set of market signals that appear contradictory but are logically consistent.

Micron Technology released its fiscal third-quarter 2026 earnings on June 25, with both earnings and outlook significantly exceeding Wall Street expectations. The supply-demand landscape for memory chips is undergoing a fundamental shift—demand for High Bandwidth Memory (HBM) from AI servers remains tight, while supply-side expansion has a clear time lag. Micron's strong results confirm that AI infrastructure investment is genuinely driving demand for upstream hardware.

But the problem lies precisely here: while upstream chip companies are raking in profits, costs are being transmitted downstream along the supply chain. Apple and Microsoft's price hike announcements are the most direct evidence of this cost transmission reaching the terminal. Jed Ellerbroek, portfolio manager at Argent Capital Management, said: "Memory chip prices continue to rise, and the prices of all electronic products with semiconductor components will follow suit. The significant inflation in the tech supply chain is having quite broad spillover effects."

The market's pricing logic has thus undergone a subtle but critical shift: investors are still paying for AI hardware demand (hence Micron's surge), but are beginning to worry that cost pressures will erode tech giants' profit margins (hence Apple and Microsoft's plunge). This is not the end of the "AI trade," but an internal structural shift within the "AI trade" moving from the terminal application layer to the upstream hardware layer.

Is the Four-Day Decline a Trend Reversal or a Interim Correction

Examining the amplitude and nature of this correction over a longer time horizon is worthwhile.

Dow Jones market data shows that the combined market capitalization of the "Magnificent Seven" has shrunk by over $3 trillion since June, potentially setting a record for the largest monthly market cap contraction ever. On June 25 alone, the seven major tech stocks saw their market cap evaporate by approximately $572 billion. Apple alone lost over $263.3 billion in market cap overnight.

But this is not the first time tech stocks have faced a massive selloff. The previous rally was equally stunning—even after this correction, Western Digital and Micron are still up 727% and 269% year-to-date in 2026, respectively. In a market deeply tied to leveraged ETFs, retail margin trading, and momentum investing, interim corrections and trend reversals may be difficult to distinguish based on price action alone.

From an index perspective, the Nasdaq Composite is down about 4.4% this week, while the S&P 500 is down about 1.9%. The Dow, in contrast, has risen about 0.7% over the same period. This divergence itself provides an important clue: funds are not exiting the stock market entirely but are reallocating between sectors. The volatility in the tech sector is prompting investors to rotate into defensive and value sectors such as healthcare, utilities, and industrials. The Dow hit an intraday all-time high, with Johnson & Johnson up about 1% and Caterpillar surging 6%—these signals point to "rotation" rather than "collapse."

How Historical Perspective Anchors the Current Valuation of Tech Stocks

The weight of tech stocks in the U.S. stock market has risen to extreme historical levels. The tech sector's weight in the S&P 500 has risen to about 37%; if Alphabet, Meta, Amazon, and Tesla are included, this proportion exceeds 50%. In the Nasdaq Composite, the tech sector's weight is between 55% and 60%, with the top ten components accounting for nearly 45% to 50%.

This extreme market concentration means two things: first, the performance of tech giants determines the direction of the indices—the combined market cap of the Magnificent Seven accounts for 34% of the S&P 500; second, once concentrated positions begin to loosen, index-level volatility is significantly amplified. The Nasdaq 100's evaporation of over $1 trillion in market cap on June 23 is a manifestation of this concentration effect.

From a valuation perspective, high-valuation tech stocks are highly sensitive to interest rate changes. As Fed policy expectations shift from "rate cuts" to "rate hikes," the pressure on valuation multiples increases accordingly. Bank of America predicts the Fed may raise rates by 25 basis points each in September, October, and December 2026, totaling 75 basis points for the year. If this expectation gradually materializes, the valuation revaluation of tech stocks may not be over.

However, the correction itself does not equal a bubble burst. The previous rally was also built on real fundamentals—AI infrastructure investment is happening, cloud vendors' capital expenditures are real, and the supply-demand tightness for HBM and memory chips is also real. The market is not suddenly doubting the existence of AI but is recalculating a more practical question: if the cost of capital is higher and profit realization is further away, what price is one willing to pay for AI assets now?

Has the Selloff Spread from U.S. Stocks to Global Risk Assets

The tech stock selloff is having cross-border transmission effects.

After the Asian market opened on June 26, the Nikkei 225 index plunged over 2,700 points in early trading, a drop of 3.82%; the South Korean KOSPI index fell more than 4% in early trading, with chip giants SK Hynix and Samsung Electronics both falling around 5%. Previously, on June 23, the KOSPI index had already dropped nearly 10% in a single day, with SK Hynix and Samsung Electronics both recording double-digit declines.

This transmission path is clear: U.S. tech giants are the demand terminals for the global tech supply chain. When the logic of terminal demand is questioned, overseas companies upstream in the supply chain come under pressure first. South Korea's memory and HBM chain is highly correlated with the U.S. AI hardware trade. The combination that previously benefited together from "AI demand explosion" is now jointly suffering from the shock of logic loosening.

The cryptocurrency market also felt the pressure. Ethereum fell 5.6% in 24 hours to around $1,555, and XRP fell 4.9%. The new round of tech stock selloff is dragging down the overall performance of global risk assets. The contraction in risk appetite is transmitting across asset classes.

What Are the Key Observation Variables for the Subsequent Market

The future direction of the market depends on the evolution of several key variables.

First is the Fed's policy path. The May PCE data rose 4.1% year-over-year, more than double the Fed's 2% inflation target. John Williams, President of the New York Fed and the "third-ranking" official at the Fed, stated that the current interest rate is "fully capable" of guiding inflation back to the 2% long-term target, expecting inflation to return to 2% by 2028. However, market expectations for the policy pace are still adjusting rapidly. If subsequent inflation data continues to exceed expectations, further rising rate hike expectations will put sustained pressure on tech stock valuations.

Second is the visibility of returns on cloud vendors' AI capital expenditures. Alphabet, Amazon, Meta, and Microsoft are expected to spend a combined total of up to $700 billion on AI this year. The market is asking: when will these massive investments translate into sufficiently clear profits? If the return period is extended or the rate of return is lower than expected, the valuation logic for tech giants will face fundamental challenges.

Third is where cost transmission ends. Rising memory chip prices have already pushed up terminal prices for consumer electronics. If costs continue to transmit downstream along the supply chain, it may eventually suppress terminal demand, forming a negative feedback loop. Ellerbroek noted that current consumer spending power is still sufficient to absorb this round of price increases—but this judgment is based on the premise that inflation does not spiral further out of control.

Summary

The selloff in U.S. tech stocks on June 25, 2026, was the result of multiple compounded pressures: terminal price hikes exposed cost-side pressures, inflation data strengthened rate hike expectations, and the market began to reassess the return efficiency of AI capital expenditures. The decline of all seven tech giants and the Nasdaq's four-day losing streak are a concentrated manifestation of these pressures.

However, the simultaneous surge in memory chip stocks within the same time window indicates that the market has not negated the AI industry trend itself but is repricing the value distribution across different links in the industrial chain. The migration of capital from high-valuation tech giants to upstream hardware and defensive sectors looks more like a structural valuation correction than the end of a trend.

Extreme market concentration means volatility will be amplified, and uncertainty in the Fed's policy path suggests valuation revaluation may not be over. The subsequent core observation variables are: whether inflation can decline, whether returns on AI capital expenditures can materialize, and whether cost transmission will form a negative feedback loop at the terminal demand level. The answers to these questions will determine whether this selloff is a phased healthy correction or the beginning of a longer-term adjustment.

FAQ

Q1: What is the main reason Apple fell over 6% in a single day?

Apple's 6.12% drop on June 25 was directly triggered by the company's announcement of global price increases for Mac, iPad, and multiple hardware products, with increases of up to $300. Apple attributed the price hikes to a significant rise in memory and storage chip costs, with AI-driven demand disrupting the original supply-demand balance. The market interpreted this signal as cost-side pressures having become too great to absorb internally, thereby raising concerns about Apple's profit margin outlook.

Q2: What does the Nasdaq's four-day losing streak mean?

The Nasdaq Composite's decline for four consecutive trading days is the first such occurrence since February this year. A four-day losing streak itself is a technical signal indicating sustained short-term selling pressure. However, from a broader perspective, the Dow's simultaneous rise to a new intraday high suggests that the market is not experiencing a broad-based decline but rather a rotation of capital from the tech sector to other sectors.

Q3: Why did memory chip stocks surge against the trend during the tech selloff?

Micron Technology's earnings report on June 25 significantly exceeded expectations, confirming that AI infrastructure investment is continuing to drive demand for upstream hardware. The supply-demand landscape for memory chips remains tight due to HBM demand from AI servers. While selling tech giants squeezed by cost pressures, the market continued buying upstream chip companies directly benefiting from AI hardware capital expenditures—this reflects a value redistribution within the AI industrial chain, not an overall retreat from the AI trade.

Q4: Is this tech stock selloff a burst of the AI bubble?

The current situation is more accurately described as an "internal structural adjustment of the AI trade" rather than a "bubble burst." The market has not negated the AI industry trend but is repricing the value of different links in the industrial chain. The simultaneous surge in memory chip stocks and crash in tech giants precisely illustrates that capital is still flowing within the AI chain, merely migrating from the terminal application layer to the upstream hardware layer. However, extreme market concentration and rising rate expectations mean volatility may persist.

Q5: What key signals need to be monitored going forward?

Three core variables: first, the Fed's policy path—May PCE rose 4.1% year-over-year; if inflation continues to exceed expectations, rising rate hike expectations will further suppress tech stock valuations; second, the visibility of returns on cloud vendors' AI capital expenditures—the four major tech giants are expected to spend a combined total of $700 billion on AI this year, and whether returns can materialize is key; third, where cost transmission ends—rising memory chip prices have already pushed up terminal prices; if this ultimately suppresses demand, it will form a negative feedback loop.