Wall Street's artificial intelligence trade took another hit Tuesday as investors dumped technology stocks amid growing concerns that valuations have outrun fundamentals, Bloomberg reports.

The selloff, which began in Asia overnight and spread to Europe and the United States, hammered semiconductor and AI-linked shares that have fueled much of the market's rally this year.

SMALL-CAPS BUCK SELLOFF

By 9:44 a.m. ET, the Nasdaq Composite had fallen 497.89 points, or 1.90%, to 25,668.71. The S&P 500 dropped 98.07 points, or 1.31%, while the Dow Jones Industrial Average lost 198.97 points, or 0.38%.

Small-cap stocks bucked the trend, with the Russell 2000 rising 24.64 points, or 0.83%, as investors rotated away from mega-cap technology names.

The latest wave of selling follows a sharp decline in South Korea's stock market, where the Kospi plunged nearly 10% from recent record highs.

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Traders cited heavy profit-taking in AI-related stocks, margin calls and selling tied to leveraged exchange-traded funds linked to memory-chip makers SK Hynix and Samsung Electronics.

The technology-heavy Nasdaq 100 fell roughly 3%, while semiconductor shares were among the market's hardest-hit names.

The VanEck Semiconductor ETF (SMH) dropped sharply as investors reassessed expectations for AI-driven earnings growth.

"The risk-off trade reflects fear AI exuberance may be overdone," Chris Low, chief economist at FHN Financial, told Bloomberg.

Despite the selloff, some strategists argue the pullback may be temporary. Evercore ISI strategist Julian Emanuel said strong corporate earnings could help restore investor confidence in the sector later this year.

Investors are also digesting a series of corporate developments that underscore the growing impact of artificial intelligence across Corporate America.

ORACLE LAYS OFF 21,000

Oracle disclosed that it reduced its workforce by 21,000 employees over the past year, with some job cuts tied to AI-driven efficiencies.

Meanwhile, Tesla reported improving sales trends in Europe, and Constellation Energy announced a long-term power agreement with Walmart that highlights growing demand for electricity from data centers and other energy-intensive operations.

The pullback comes after a powerful rally that pushed major indexes to record highs during the first half of 2026, driven by easing geopolitical tensions, resilient economic growth and enthusiasm surrounding artificial intelligence.

Whether Tuesday's selloff proves to be a healthy correction or the start of a more significant reassessment of the AI trade may depend on upcoming earnings reports from major technology and semiconductor companies.

MARKET SNAPSHOT
(9:44 a.m. ET)

S&P 500: 7,374.72, -98.07 (-1.31%)

Dow Jones Industrial Average: 51,513.74, -198.97 (-0.38%)

Nasdaq Composite: 25,668.71, -497.89 (-1.90%)

Russell 2000: 3,004.40, +24.64 (+0.83%)

Stocks in Focus

• Oracle (ORCL): Revealed workforce reduction of 21,000 employees over the past year.

• Tesla (TSLA): European sales recovery gained momentum in May.

• Constellation Energy (CEG): Signed long-term power agreement with Walmart.

• Walmart (WMT): Partnering with Constellation on electricity supply.

• Pfizer (PFE): Experimental lung cancer drug failed to improve survival in late-stage trial.

• Avis Budget Group (CAR): Set to receive $650 million settlement payment from Pentwater Capital.