The US stock futures pointed to a weak start on Friday, June 26, as the global technology sell-off resurfaced, overshadowing the optimism sparked by Micron Technology’s blockbuster fiscal third-quarter results, which had reassured investors that heavy AI infrastructure spending continues to generate healthy returns.
Futures tied to the tech-heavy Nasdaq 100 slid 1.1%, while those linked to the S&P 500 fell 0.5%. Dow Jones Industrial Average futures were last down 0.1%.
In the previous session, the Nasdaq erased all of its early gains and closed 1% lower, as a 6% slump in Apple Inc.’s shares offset sharp gains in semiconductor stocks, particularly Micron Technology.
The weakness persisted in today’s trade following the sell-off in SoftBank, Samsung Electronics Co. and SK Hynix Inc., which triggered a second trading suspension within days in Seoul.
SoftBank Group Corp.’s shares plunged 13% after reports that OpenAI may delay its initial public offering, postponing potential returns for its Japanese backer. According to The New York Times, the ChatGPT maker is now leaning towards delaying its IPO until 2027.
Concerns over elevated valuations and whether future earnings can justify the massive capital expenditure currently being deployed have also prompted investors to rotate out of semiconductor and technology stocks, leaving the Nasdaq 100 on track to end the week down around 3%.
Meanwhile, the US dollar largely held on to its recent gains, putting it on course for one of its strongest monthly performances in more than a year.
On the macroeconomic front, the US Personal Consumption Expenditures (PCE) Price Index—the Federal Reserve’s preferred inflation gauge—rose 4.1% in the 12 months through May. The reading marked the first print above 4% since April 2023 and was largely driven by higher energy prices following the Iran war.
Markets are currently pricing in an 80% probability of a Federal Reserve rate hike in December, compared with 85% before the release of the PCE data and 61% before last week’s Fed policy meeting, according to CME FedWatch data.
Why are AI stocks suddenly under pressure?
Domestic brokerage firm Vested Finance said the current market correction does not signal the end of the artificial intelligence theme but rather reflects the extremely high expectations that had been built into AI-related stocks.
“The story isn’t that artificial intelligence is over. It’s that expectations became extremely high,” the brokerage said.
According to Vested Finance, investors have aggressively bought companies supplying memory chips, networking equipment, and AI infrastructure over the past year, betting that spending on AI would continue at breakneck speed. That optimism pushed valuations to record levels.
However, the brokerage noted that markets are now starting to ask tougher questions.
Vested Finance said recent reports of rising AI infrastructure costs, softer pricing in some parts of the industry and uncertainty surrounding upcoming AI investments have prompted investors to book profits. Reports suggesting that OpenAI could delay its initial public offering have further added to the cautious mood.
Oil returns to pre-war levels
Crude oil prices remained under pressure on Friday, with Brent crude futures falling below $73 a barrel, the lowest level since February 27, as shipping traffic through the Strait of Hormuz continued to recover.
So far this week, Brent crude is down 9%, heading for a third consecutive weekly decline and on track to post its biggest monthly drop since March 2020. Meanwhile, US West Texas Intermediate (WTI) crude futures slipped 4% to an intraday low of around $69 a barrel.
The decline in crude oil prices has eased global inflation concerns and reduced fears of imminent interest rate hikes by major central banks, including the US Federal Reserve. The Strait of Hormuz, which typically handles nearly one-fifth of the world’s oil and gas shipments, had witnessed limited traffic for more than three months due to the blockade.
However, the recent peace agreement between the US and Iran has led to a recovery in shipping volumes through the Strait. In addition, the US decision to allow the resumption of Iranian crude exports has further improved market sentiment, pulling crude oil prices back to pre-war levels.
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
