The technological punch scares the world's stock exchanges

A significant downturn in technology stocks has sent shockwaves through global financial markets, marking one of the most severe corrections in recent years. The situation reached its peak on Monday when the Korean stock exchange experienced a historic drop of 10%, the maximum allowed under its automatic stabilization mechanisms. This dramatic fall came despite earlier optimism fueled by the surge in artificial intelligence (AI) investments throughout 2026. In contrast, European markets showed more resilience, with average declines around 1%, while the Nasdaq in the United States fell by 2.2% and the S&P 500 dropped by 1.44%.

The primary catalyst behind the sell-off appears to be the potential for interest rate hikes by the Federal Reserve. This possibility has prompted investors to reassess their expectations regarding the future growth of AI technologies, which had previously driven substantial gains in tech stocks. Notably, SpaceX, founded by Elon Musk, saw its value plummet by 16% on Monday, losing over $400 billion in market capitalization. However, the stock rebounded slightly on Tuesday, closing up 0.94% after starting the day with a steep decline.

European markets, less exposed to the high-tech sector, recorded moderate losses, with the Euro Stoxx 50 index showing an average decrease of 1%. Meanwhile, Japan's stock market suffered significantly, dropping nearly 3.5%, and Hong Kong's Hang Seng index entered bear territory, having fallen 20% from its recent highs. Analysts at UBS noted that investors are increasingly recognizing signs of market saturation and are beginning to question how much further tech stocks can rise before encountering risks.

The sharp declines were influenced by several factors, including forced liquidation of positions by small investors and sales of leveraged ETFs, some of which faced losses of up to 25% in a single day. Alexander Redman, a strategist at CLSA in Singapore, highlighted that the speculative nature of the Korean market, heavily driven by retail investors, played a crucial role in amplifying the volatility. Similar patterns were observed in the United States, where individual investors' participation via ETFs contributed to the broader market movement.

SpaceX's stock plunge was not isolated; other major players in the semiconductor industry also experienced significant drops. Nvidia corrected by 3.5%, and the overall semiconductor index in Wall Street fell by 6%. In Europe, companies such as ASML and ST Microelectronics saw declines of approximately 7%. In Spain, construction-focused company ACS, which specializes in data center infrastructure, fell by 3%, leading the declines on the Ibex index.

Market participants remain divided on when the Federal Reserve might begin raising interest rates. Futures markets currently suggest a roughly 40% chance of a rate hike in July, with institutions like Bank of America predicting up to three increases this year, a shift from previous forecasts that anticipated none. The yield on the 10-year U.S. Treasury bond exceeded 4.5% during the session, reflecting increased demand for safer assets amidst the turmoil.

The foreign exchange market also reacted to changing interest rate expectations. The dollar strengthened against the euro, reaching 1.139 units per euro, the lowest level in over a year below the 1.14 mark. These movements underscore the interconnectedness of global financial systems and highlight the sensitivity of currency values to macroeconomic indicators and geopolitical developments.