SpaceX extends losses after $600b wipeout, tech stocks tumble again

Shares of Elon Musk’s SpaceX slipped further on Tuesday following a three-session ‌selloff that wiped out more than $600 billion from the company’s market value, with the highly valued technology sector on ​track to extend the rout.

The rocket and AI company’s shares fell 1.9% to $151.6earlier on Tuesday. The ‌stock sank 5% to as ‌much as $146.88 - dipping below $150, its opening price on the day of its market debut.

SpaceX’s record-breaking IPO fueled a trading frenzy in its first week as a listed company, when it briefly surpassed Microsoft and Amazon in market valuation before retreating. SpaceX last ‌had a market valuation of $1.99 trillion.

“I’d be cautious about seeing this as a second-chance buying opportunity. The drop looks dramatic in scale, but these swings aren’t unusual for a stock with such a small public float,” said Nic Puckrin, cross-asset analyst and founder of Coin Bureau.

The company’s shares currently stand more than 10% above their IPO price of $135.

Big IPOs often face turbulence in their early days on the public market. A Reuters analysis of 50 IPOs with the highest valuations in the past five years showed investors would have been better off buying an S&P 500 index fund ​about three-quarters of the time than buying into a big IPO. SpaceX also announced a bond offering earlier ‌this week.

Meanwhile, futures tracking the tech-heavy Nasdaq 100 index dropped 3.1%, implying a more than 800-point fall. The index will lose $1.15 trillion in market value if it drops 2.79%, according to Reuters calculations.

Chipmakers, which have emerged as some of the biggest winners of the AI trade so far this year, also clocked heavy losses. Intel and Advanced Micro Devices dropped 7.2% each.

Memory chipmakers - the best-performing stocks on the S&P 500 so far this year - lagged on Tuesday, with ​Micron Technology down 8.4%, ‌SanDisk falling 9.1% and Western Digital losing 7.5%. Memory chipmakers in South Korea also recorded steep declines.

Six of the ‌seven “Magnificent Seven” group of companies - the biggest technology stocks on Wall Street - were under pressure as investor concerns about elevated AI spending grew.

Commonly dubbed hyperscalers, these firms have committed billions to ramp up their AI infrastructures, though clearer evidence that AI products can ‌generate returns justifying ‌the spending remains elusive.

Lauren Hyslop, investment manager at Mattioli Woods, cited a more challenging interest-rate backdrop and concerns about the scale of capital required to fund the ‌next phase of AI investment among the reasons for the selloff.

Alphabet shed 2.1%, Amazon.com fell 0.9%, Tesla was down 2.7%, Nvidia lost 2.7% and Apple was 0.9% lower in premarket trading. The companies are set to erode a combined $331 billion in market value, if losses hold.

Rate-sensitive technology stocks have also been ​hurt by expectations of tighter monetary policy under US Federal Reserve Chair Kevin Warsh, especially as recent economic data points to a resilient economy.

Microsoft was an outlier, climbing 1.3%, in line with a rise in software stocks like Workday and Salesforce.

Global stocks fell on Tuesday, led by broad-based declines in technology shares, including SpaceX, as growing expectations for ‌the Federal Reserve to be more aggressive in tackling inflation drove investors into bonds and the dollar. Futures on the Nasdaq were ​down more than 2.5%, suggesting Monday’s 1.3% slide might extend into a second day. Shares in SpaceX struggled to push into ‌positive territory in Tuesday’s premarket, after having ‌lost nearly 17% on Monday, while the likes of Alphabet, Meta Platforms and Microsoft also tumbled. S&P 500 e-mini futures were down 1.2%. The STOXX 600 fell 0.8%, under pressure from declines in European semiconductor and chip-equipment makers, which followed declines in tech stocks in Japan and South Korea, where Seoul’s ‌KOSPI index fell 10% in its largest one-day selloff since March. “Questions are once again being raised over AI infrastructure spending, particularly as some corporate giants plan to sell equity to help fund expansion,” Trade Nation senior market analyst David Morrison said. “Time will tell if this is yet another ‘buy the dip’ opportunity, or a harbinger of worse things to come.”

Meanwhile, Brent crude futures remained below $80 a barrel on Tuesday, as the number of vessels transiting through the Strait of Hormuz continued to build, with oil prices in the physical market almost back to pre-war levels.

A drop in oil prices would ordinarily give stocks a boost, but investors are now focused on ​what the surge in energy prices will mean for central bank policy and, specifically, the Federal Reserve. New chair Kevin ‌Warsh looks set to take a much tougher line on inflation. As such, 2-year Treasury yields, which are the most responsive to shifts in expectations for inflation and rates, have shot to their highest levels in 16 months, while longer-dated yields have also risen sharply. On Tuesday, 2-year and 10-year yields were both down around 3 basis points on the day at 4.20% and 4.49%, respectively.

“The adjustment higher in US yields is creating a more challenging backdrop for risk assets in the near term after strong gains in recent months,” MUFG currency strategist Lee Hardman said.

Money markets show investors ​are close to fully ‌pricing in a rate rise by September. Against that backdrop, the dollar is at one-year highs against a basket of currencies.

Agencies