PrintUS STOCKS-US futures fall on tech selloff as concerns about hawkish Fed, AI spending mount
BY Reuters | ECONOMIC | 09:08 AM EDT* Futures down: Dow 0.47%, S&P 1.42%, Nasdaq 2.96%
* Russell 2000 futures fall 1.6%
* Mega-cap tech, chip shares lead selloff
* CBOE Volatility Index at an over one-week high (Updates before markets open)
By Twesha Dikshit and Joel Jose
June 23 (Reuters) - U.S. stocks were set to open lower on Tuesday, following sharp losses in megacap and semiconductor stocks as investors braced for a more hawkish Federal Reserve and scrutinized growing debt-funded AI spending.
If losses hold, the Nasdaq 100 would lose over $1 trillion
in market value. Nvidia
Memory chipmakers Micron Technology
A sharp selloff in the previous session rocked U.S. tech heavyweights, driven by doubts over hyperscalers' debt-backed AI spending despite stretched valuations.
"The AI trade became one of the most crowded trades in global markets. When everybody owns the same stocks, the exit door becomes very small very quickly," said Nigel Green, chief executive of investment adviser deVere Group.
At 08:26 a.m. ET, Dow E-minis were down 247 points, or 0.47%, and S&P 500 E-minis were down 106.75 points, or 1.42%. Nasdaq 100 E-minis were down 906.75 points, or 2.96%.
Futures tracking the rate-sensitive Russell 2000 Index fell 1.6%. The CBOE Volatility Index, Wall Street's fear gauge, hit an over one-week high, climbing 2.67 points to 19.95.
Shares of Elon Musk's SpaceX fell 2.7%. More than $600 billion was wiped off from the company's market value over the past three sessions.
SpaceX, which debuted earlier this month, joined a list of megacaps to tap the bond market to raise capital.
"SpaceX is not yet part of the Nasdaq indexes, but the fact that it is jumping on the bond train to fund excessive AI and infrastructure spending revives earlier concerns that Big Tech may be spending too much on AI infrastructure and increasingly financing that spending through debt," said Ipek Ozkardeskaya, senior market analyst at Swissquote Bank.
Traders are increasingly betting on a second interest rate hike by the U.S. Fed by December, according to LSEG data, compared to expectations of just one 25-basis-point hike two weeks ago, as investors price in hawkish monetary policy under new Chair Kevin Warsh.
The S&P 500 is heading for its strongest quarterly gain in six years, buoyed by a Middle East ceasefire and stronger-than-expected earnings, even as concerns over stretched AI stock valuations resurface.
Micron's results, expected on Wednesday, could offer some clues on the outlook for the memory and AI chip sector after a searing rally this year.
Investors are keeping a close eye on developments in the Middle East after the U.S. waived sanctions on Iran for 60 days after the first round of talks under a nascent peace deal.
Market attention will turn to a batch of private surveys on June business activity later in the day, ahead of the closely watched Personal Consumption Expenditures Index data, the Federal Reserve's preferred inflation gauge, on Thursday. (Reporting by Johann M Cherian, Twesha Dikshit and Joel Jose in Bengaluru; Editing by Mrigank Dhaniwala, Sherry Jacob-Phillips and Shinjini Ganguli)
