Nasdaq Drops 2.2% as Global AI Selloff Hammers Chip Stocks From Seoul to Wall Street
- The Nasdaq Composite fell 2.2% (579 points) to 25,587 while the S&P 500 dropped 1.4%, led by a broad semiconductor rout [1]
- South Korea's KOSPI plunged 10% to 8,203, triggering a 20-minute circuit breaker halt, with Samsung and SK Hynix both falling over 12% [2]
- Micron Technology dropped 13.2% ahead of Wednesday earnings, while AMD fell 5.8%, Intel 6.1%, and Nvidia 4.1% [3]
- The VanEck Semiconductor ETF (SMH) fell 7.1%, its steepest single-day decline in months [3]
- Foreign investors dumped a net 5.79 trillion won ($3.8 billion) of Korean shares during the session [2]
A global selloff in AI-linked stocks ripped through markets on Tuesday, sending the Nasdaq Composite down 2.2% — roughly 580 points — to 25,587 as investors fled semiconductor and memory chip names that have led the market's 2026 rally. The S&P 500 fell 1.4%, while the VanEck Semiconductor ETF (SMH) dropped 7.1% [1].
The carnage began overnight in Asia, where South Korea's KOSPI index crashed 10% to 8,203.84 — its worst single-day decline in years — triggering a market-wide circuit breaker that halted trading for 20 minutes. Samsung Electronics and SK Hynix, which together account for roughly 48% of the KOSPI's market value, both plummeted more than 12% as foreign investors sold a net 5.79 trillion won ($3.8 billion) of shares [2].
The selling cascaded into U.S. trading hours. Micron Technology, which reports quarterly earnings Wednesday, led losses with a 13.2% decline to $1,051.77. AMD dropped 5.8%, Intel fell 6.1%, Nvidia — the bellwether of the AI trade — slid 4.1% to $200, and Broadcom lost 3.1% [3]. Tesla fell 5.8% in a broader risk-off move [1].
What Happened
The selloff reflected a sudden recalibration of risk across the global AI trade. In South Korea, the KOSPI's 10% plunge was driven by three converging forces: an overnight drop in U.S. technology stocks, renewed concerns about Federal Reserve interest rate policy, and the unwinding of leveraged AI-related positions [2].
Samsung Electronics and SK Hynix have been the KOSPI's primary drivers in 2026, contributing roughly 70% of the index's gains this year. Their combined 12%-plus decline on Tuesday dragged the entire Korean market into circuit-breaker territory [2].
Japan's Nikkei 225 fell 3.6% and Hong Kong's Hang Seng dropped 1.8%, extending the rout across Asia before U.S. markets opened [1]. By the time Wall Street's opening bell rang, the damage to semiconductor stocks was already severe.
The Semiconductor Rout
Memory and data storage stocks bore the brunt of the selling. Micron Technology's 13.2% decline — its steepest in months — came ahead of its quarterly earnings report scheduled for Wednesday, adding fundamental uncertainty to an already jittery sector. The stock has risen 268% year-to-date even after Tuesday's losses, underscoring the scale of the AI-driven rally that preceded the selloff [3].
The VanEck Semiconductor ETF (SMH) lost 7.1% on the day, falling to $621.29. AMD dropped 5.8% to $519.85, Intel declined 6.1% to $132.28, and Broadcom fell 3.1% to $380.15 [3].
Nvidia, the single largest beneficiary of the AI infrastructure buildout, fell 4.1% to $200 — dropping below its 50-day moving average of $209.81. The stock now sits 15.4% below its 52-week high of $236.54 [3].
Why It Matters
Tuesday's selloff marks the most significant test of the AI trade narrative in 2026. While concerns about stretched valuations in AI-linked stocks have circulated for months, the concentrated nature of this decline — hitting memory chips, GPU makers, and networking stocks simultaneously across multiple time zones — suggests a more coordinated de-risking event than previous pullbacks [1].
The KOSPI's 10% crash is particularly notable because South Korea's market has become a proxy for global AI sentiment. Samsung and SK Hynix supply the vast majority of high-bandwidth memory (HBM) chips used in AI data centers, making them a direct read on demand expectations for AI infrastructure [2].
Microsoft was a rare bright spot among mega-cap tech names, rising 1.8% to $373.94. Apple held relatively steady, falling less than 1%. The divergence suggests investors are differentiating between companies with proven AI revenue streams and those whose valuations rest more heavily on future expectations [3].
What's Next
All eyes now turn to Micron's earnings report on Wednesday, which will provide the first major data point on AI memory demand since the selloff began. Analysts will scrutinize guidance for any signs that hyperscaler capital expenditure plans are moderating [1].
Micron's results are expected to be a bellwether for the broader memory chip sector and could either stabilize or accelerate the selling. The stock's year-to-date gain of 268% — despite Tuesday's 13% drop — illustrates the extent to which AI optimism has been priced into semiconductor valuations [3].
In South Korea, retail investors provided a contrarian signal, purchasing a record net 11.11 trillion won of shares during the selloff, suggesting local confidence in the long-term AI thesis remains intact even as institutional and foreign investors exited [2].
Further sources
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