AI stocks resumed their sell-off on Tuesday, pulling Wall Street sharply lower and away from the record highs set just a week ago. The S&P 500 fell 1.7% after swinging between an early gain of 1% and a loss of 2.3%, while the Nasdaq composite dropped 2.9%. The Dow Jones Industrial Average lost 408 points, or 0.8%, as of 1 p.m. Eastern time.
The decline was driven by sharp reversals in chip and memory stocks that underpin the AI boom. Micron Technology surged 4.2% at the open only to close down 7.6%, a day after it jumped 9.9% and two days after it plunged 13.3%. Marvell Technology tumbled 13.3%, and Advanced Micro Devices sank 8.7%, each erasing early-morning gains. Nvidia fell 3.1%, becoming one of the heaviest drags on the S&P 500.
Analysts are debating whether this marks the start of a prolonged downturn or a necessary shake-out. Micron’s stock has tripled this year, fueling criticism that its rally has run too far, too fast. The broader question hangs over the AI sector: is excessive optimism being purged, or has the narrative fundamentally shifted?
Some investors warn the sell-off may deepen if market conditions tighten. Yet others see an opportunity, arguing the volatility merely resets valuations after an extraordinary run. The next catalyst will be earnings reports from major chipmakers, which could either soothe or inflame the uncertainty.