Traders work on the floor at the New York Stock Exchange (NYSE) in New York, on June 22, 2026. Brendan McDermid/Reuters
Stock prices for companies that produce artificial intelligence chips experienced a significant decline across the globe on Tuesday, leading to a drop in major stock market averages and attracting renewed attention to the AI sector.
Leading semiconductor companies, including Micron and Sandisk, saw their stock values plummet by over 10% during afternoon trading. Even Nvidia, the dominant player in the AI chip market, experienced a 3% decrease in its share price on Tuesday.
Overall, the Nasdaq, which is heavily weighted with technology stocks, decreased by 1.4% by Tuesday afternoon, while the S&P 500 fell by nearly 1%. This market downturn followed a substantial drop of nearly 10% in South Korea’s benchmark KOSP index.
Several market analysts who spoke with ABC News suggested that the decline was due to a practice known as profit-taking, where investors sell their holdings to secure gains after a period of sustained price increases.
Furthermore, the analysts indicated that the slump might reflect concerns regarding the substantial investments being made in AI. This is particularly relevant as Wall Street anticipates a potential increase in interest rates later this year, which could escalate borrowing costs for companies needing to finance the development of this capital-intensive technology.
In this June 25, 2025, file photo, the logo for Micron Technology is posted at their headquarters in San Jose, Calif.Justin Sullivan/Getty Images, FILE
“What we’re seeing today is a pullback, not a collapse,” stated Steve Sosnick, chief strategist at Interactive Brokers, in comments to ABC News. “However, it is reasonable to question whether the returns on the vast sums of money being channeled into AI are truly sustainable.”
Despite the selling pressure observed on Tuesday, the share values of chip manufacturers remain significantly higher than at the beginning of the year. This suggests that the current downturn represents a period of cautious assessment rather than a fundamental shift in the perception of AI, according to some analysts.
Micron has experienced an impressive surge of 277% in its value this year. Sandisk has seen a remarkable increase of 735% over the same period. Nvidia, the world’s largest company by market capitalization valued at $4.8 trillion, has witnessed its shares appreciate by 8% this year.
It was inevitable that chipmakers would encounter some volatility after such an extraordinary ascent, commented Bret Kenwell, an investment analyst at eToro, to ABC News.
“I don’t find this surprising, considering the extent of the recent gains,” Kenwell remarked.
Nevertheless, some analysts expressed reservations about the future prospects of the AI industry, which has attracted trillions of dollars in investment but has yet to generate profits on a comparable scale.
Traders work on the floor at the New York Stock Exchange (NYSE) in New York, on June 22, 2026.Brendan McDermid/Reuters
Critics contend that the substantial expenses have created pressure for AI to yield extraordinary profits, yet there is limited evidence suggesting that businesses or average consumers will derive sufficient value to justify significant financial outlay. The technology must demonstrate its worth within years rather than decades, critics add, as the current level of expenditure is not sustainable.
A study from MIT last year revealed that approximately 95% of businesses investing in AI had not yet achieved profitability from the technology. The study estimated the collective financial investment made by these companies in AI to be around $40 billion.
The renewed focus on the costs associated with AI arrives at a time when expectations are rising regarding a potential increase in interest rates this year.
According to the CME Group’s FedWatch Tool, which gauges investor sentiment, futures markets indicate approximately a 50% probability of an interest rate hike in September. These odds have increased since last week, following remarks by Fed Chair Kevin Warsh expressing a commitment to tackle inflation during his initial meeting as head of the central bank.
“The capital being allocated to AI is immense. What is the cost of that capital? It doesn’t appear to be decreasing in the immediate future,” Mike Loukas, CEO of TrueMark Investments, told ABC News.
Analysts held differing views on the degree of concern sparked by the technology selloff regarding the AI sector. Some observed a shift in market sentiment as optimism begins to wane, while others dismissed the event as a transient fluctuation.
“In this market, we will continue to experience several ‘gut-check moments’ within the technology sector as the AI Revolution is still in its early stages,” Dan Ives, managing director of equity research at Wedbush, informed clients on Tuesday in a statement shared with ABC News. “This morning is simply another one of those instances.”
Sourse: abcnews.go.com