Wall Street is rocked by a violent sell-off, with the chip sector leading a broad sell-off that sends the S&P 500 down 1.5%.

US markets experienced a turbulent session on Tuesday, as shares of electronic chip companies came under severe selling pressure, pushing Wall Street indices to record significant losses, at a time when questions are growing about the extent to which the artificial intelligence boom can justify the high valuations and huge spending witnessed by technology companies.

The S&P 500 index fell 1.5%, while the technology-dominated Nasdaq index dropped 2.1%, amid a broad sell-off targeting artificial intelligence and semiconductor stocks, sectors that have led the markets’ rise in recent months.

The greatest pressure came from the semiconductor sector, where a major index of chip stocks fell by about 8%, reflecting growing concerns about the overvaluation of artificial intelligence companies. Investors believe that the massive spending on AI infrastructure, estimated at hundreds of billions of dollars, does not necessarily guarantee future profits that justify the high market valuations or the record capital expenditures these companies are experiencing.

Shares of memory companies were the hardest hit during the session, with Micron shares plummeting by more than 13%, while SanDisk shares lost almost the same percentage, wiping out a significant portion of the gains these companies had accumulated recently. The sell-off extended to global markets, with South Korea’s Kospi index falling by approximately 10% from its recent record highs, transforming what began as a limited local correction into a widespread decline in technology stocks worldwide. The severity of the losses in the Korean market was so great that authorities activated temporary trading halts to curb the sharp fluctuations.

In other asset markets, Bitcoin’s price fell by about 3%, while investors turned to defensive assets and safe havens, primarily the US dollar, amid growing concern about the future of growth and technology stocks.

Despite the sharp losses seen on Tuesday, US stock futures showed some stability during Wednesday’s trading, with Micron and SanDisk shares rising by about 1% in extended trading. Investors are awaiting Micron’s earnings results, which could be a significant test of investor sentiment toward the entire artificial intelligence sector, especially after the recent surge in valuations of companies associated with this technology.

In Asia, Japan’s Nikkei index fell 0.6%, while South Korea’s Kospi rebounded by more than 3% after its sharp losses in the previous session. However, markets are still debating whether this rebound represents the start of a genuine recovery or merely a temporary technical rebound. Meanwhile, SpaceX shares managed to recover some of their losses after briefly dipping below their initial public offering price, indicating the continued high volatility in technology and innovation-related stocks during this period.