A steep sell-off in South Korea spread to Europe and the U.S. on Tuesday, as investors, traders and speculators asked hard questions about the sustainability of capex plans amid what so far has seemed to be an ever-expanding artificial intelligence (AI) boom. Meanwhile, the Trump administration is talking up another cutting-edge corner of the stock market.
The KOSPI Index, which includes South Korea-based semiconductor stocks such as Samsung Electronics (SSNLF) and SK Hynix (HXSCL), fell 910 points, or 9.99%, to 8,203 on Tuesday. The two chipmakers, which account for more than half of the KOSPI’s value, had led the index past the 9,100 level for the first time ever on Monday.
By the closing bell, the tech-heavy Nasdaq Composite was off 2.2% at 25,587, the broad-based S&P 500 had declined by 1.4% to 7,365, and the Dow Jones Industrial Average was down 0.1% at 51,666.
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“There is a great near-term buying window for many of the high-flying memory and other technology stocks,” Louis Navellier of Navellier & Associates observes, noting that memory stocks showed relative strength on Monday as the Nasdaq sold off late, “but lost their mojo” because of what happened overseas.
Indeed, Navellier expects Micron Technology (MU, -13.2%) to announce record top- and bottom-line results after the closing bell on Wednesday. “The last correction in AI-related stocks this month only lasted four trading days,” he writes, “so every dip should be viewed as a buying opportunity.”
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The front-month West Texas Intermediate crude oil futures contract was down 0.7% to $73.34 per barrel and has now retreated almost 40% from its wartime highs near $120, as inflation pressure from the Strait of Hormuz continues to ease.
Meanwhile, the 2-year Treasury yield ticked up to another new 52-week high on Tuesday before settling at 4.200% vs 4.219% on Monday, as markets continue to price in a path for short-term interest rates under new Fed Chair Kevin Warsh.
Big Blue gets a quantum bounce from the White House
International Business Machines (IBM, +5.0%) was No. 1 among the 30 Dow Jones stocks on Tuesday, as markets bid up the old-school technology firm on word from the White House of two new executive orders designed to accelerate quantum innovation and to protect against cryptographic attacks.
D-Wave Quantum (QBTS, +2.2%) showed green numbers, too. But quantum computing wasn’t immune to broader selling pressure in the tech space, with Rigetti Computing (RGTI, -0.5%) and IonQ (IONQ, -0.8%) lower for the day.
Infleqtion (INFQ, +12.0%), which completed its initial public offering (IPO) in February, and Quantinuum (QNT, +13.5%), a former subsidiary of Honeywell (HON, -2.5%) that debuted as a standalone public company on June 4, did post big gains.
“Quantum technologies represent the next generation of innovation across computing, sensing, and networking, with enormous significance for our country’s economic growth, scientific research, and cyber security,” President Donald Trump said on Monday. “It’s really a big deal that we’re doing.”
ARK is buying more SPCX
SpaceX (SPCX, +1.0%) enjoyed its first positive session since last Tuesday after ARK Invest revealed through its trade notification system that it purchased a total of 210,121 SPCX shares.
The ARK Innovation ETF (ARKK, -2.1%) added 131,837 shares, the ARK Autonomous Technology & Robotics ETF (ARKQ, -2.8%) 43,486. The ARK Next Generation Internet ETF (ARKW, -2.0%) and ARK Space Exploration & Innovation ETF (ARKX, 1.7%) bought 21,506 and 13,292 shares, respectively.
On Monday, SPCX stock was down more than 16%, and its market cap declined by about $400 billion. According to Dow Jones Market Data, that’s the second-biggest single-day loss for any company in stock market history.
Susquehanna analyst Charles Minervino initiated coverage of SPCX with a Neutral (Hold) rating and a $170 12-month target price. “The current valuation requires premium multiples on very aggressive revenue and EBITDA growth assumptions,” Minervino says. “With some of the markets that SPCX operates in being relatively unproven, we believe a wide range of outcomes exist.”