Investors rotate out of AI-linked equities after Alphabet shares drop 5% on talent departures and Fed rate-hike signals.
The Nasdaq Composite fell 2% at Tuesday’s open, led by a 5% slide in Alphabet shares after two senior AI researchers exited. The Dow and S&P 500 also retreated, erasing early-session gains as focus shifted from geopolitics to valuation concerns in the AI sector.
Year-to-date, the Nasdaq has climbed 10%, the Dow 6%, and the S&P 500 7.3%, driven by $85bn in AI infrastructure spending. Yet seven tech stocks now account for 30% of the S&P 500’s market cap, sparking comparisons to the 2000 dot-com bubble.
Federal Reserve officials last week signaled potential rate hikes to combat inflation, raising borrowing costs for growth stocks. Alphabet’s worst day in over a year amplified worries, triggering broader profit-taking across chipmakers and AI-linked equities.