The AI trade, which has been the single most crowded bet on Wall Street for the better part of two years, just hit a wall. The Nasdaq Composite dropped 4.18% on June 5 to close at 25,709.43, its worst single-day performance since April 2025. Across the Pacific, the damage was even more severe, with South Korea’s KOSPI index collapsing nearly 10% from its peak by June 23, triggering circuit breakers as semiconductor giants cratered.
Losses across major indices have amounted to over $1 trillion.
What triggered the selloff
Two catalysts converged to create a particularly toxic cocktail for tech stocks. First, Broadcom issued AI-related product guidance that fell short of expectations. Second, the May jobs report showed 172,000 new positions added, more than double the roughly 80,000 that economists had forecast. A hot labor market means the Federal Reserve has less reason to cut interest rates, which is bad news for growth stocks whose valuations depend on cheap money stretching into the future.
Nvidia shares dropped more than 6%. Broadcom fell nearly 8%. The S&P 500 declined 2.64% on the same day.
