U.S. tech and chip stocks face valuation test as volatility hits markets

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Tech & chip stocks under test

Highlights

The U.S. chip stock index slumps 8% and Micron Technology drops 13%, reflecting renewed volatility and testing confidence in AI-related semiconductor demand.
FedEx slips 6% post-earnings on margin concerns, private credit outflows accelerate at Morgan Stanley and Apollo, and SpaceX shares stabilize above post-IPO levels despite recent declines.
Brent crude falls below $76 a barrel to four-month lows amid U.S.-Iran talks, while the dollar index hits a 13-month high and Bank of Japan eyes intervention against yen weakness.

Chip sector swings and policy pressure

As reported by Reuters, an 8% slide in the high-flying U.S. chip stock index on Tuesday injects fresh volatility into markets after a powerful run earlier this year. Micron Technology falls about 13% ahead of its earnings update, wiping out gains made the previous day and setting up the next major test for investor confidence in AI-linked semiconductor demand.

The selloff follows a 10% retreat in South Korea's chip-heavy KOSPI earlier in the day, although the KOSPI, other Asian bourses and U.S. futures stabilize somewhat overnight. The Nasdaq loses more than 2% in Tuesday's tech-led decline, reviving questions about stretched valuations across the sector.

Investors are also weighing stronger expectations for further Federal Reserve tightening after last week's policy meeting. Bank of America expects three rate hikes through next January, while Citi still expects three cuts, underscoring how sharply market views diverge on the path ahead.

Outside semiconductors, SpaceX shares remain under pressure after falling steeply from their post-IPO peak, though they find support above the listing price on Tuesday. FedEx stock drops 6% out of hours after margin concerns in its latest earnings update, while private credit unease persists as Morgan Stanley joins Apollo in reporting heavy redemptions from flagship funds.

Broader market signals and political backdrop

June U.S. business surveys come in above forecasts, pointing to continued economic resilience even as tighter policy expectations build. In commodities, Brent crude dips below $76 a barrel as U.S.-Iran talks and increased Gulf shipping activity help push oil toward four-month lows.

Currency markets reflect the same rate-driven mood, with the dollar index reaching a 13-month high. Attention remains fixed on possible Bank of Japan intervention as authorities try to prevent the U.S. currency from approaching 40-year highs against the yen, while Japan's search for better ways to manage its $1.3 trillion in foreign exchange reserves also draws notice.

Political sentiment adds another layer for investors watching U.S. risk. A Reuters/Ipsos poll shows Trump's approval rating falling to 34%, matching the lowest level of his second term first seen in April, while only 24% of Americans say the war with Iran is worth the costs.

In our earlier article on the tech-led selloff that erased about $1.3 trillion from Nasdaq 100 market value, we noted that investors were growing wary of stretched AI valuations after months of rapid gains. We highlighted Micron’s upcoming earnings as a key test for confidence in AI-driven semiconductor demand, with heavy positioning and geopolitical uncertainty keeping markets prone to sharp swings.

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