Gold slides as Nasdaq 100 plunges 3% in AI rout

A broad selloff in technology shares triggered a flight to the US Dollar, sending gold prices lower as investors rotated out of commodities and into the greenback.

The S&P 500 fell 1.5% and the Nasdaq 100 plunged 3% on Tuesday as a rout in artificial intelligence-related stocks deepened, with the Philadelphia Semiconductor Index slumping 7%. The Dow Jones Industrial Average proved more resilient, slipping 0.6%. The selloff began in Asia after South Korea's KOSPI crashed 10%, triggering a trading halt, as foreign investors dumped more than $2.5 billion worth of shares, according to exchange data.

"The risk-off trade reflects fear AI exuberance may be overdone," Chris Low, chief economist at FHN Financial, said. The comments came after reports that SK Hynix may slow the expansion of AI memory-chip production, sending the company's shares down more than 12% and rattling sentiment across the global semiconductor supply chain. Samsung Electronics also fell more than 12%, compounding losses in the sector.

The US Dollar Index surged as investors sought safety, pressuring gold prices. Brent crude traded below $77 a barrel, while the MSCI Emerging Markets Index declined 3.7% as the selloff spread across asset classes. The Stoxx Europe 600 fell 0.92%, with technology and semiconductor shares leading losses in Europe as well. An Asian technology stock gauge dropped as much as 5%, snapping an eight-session winning streak.

The AI-driven rally has been one of the strongest drivers of global equities this year, helping major indices reach record highs despite elevated interest rates and geopolitical tensions. SK Hynix shares had surged nearly 350% before Tuesday's collapse, while margin borrowing by South Korean retail investors hit a record high, pointing to speculative excess in one of the world's best-performing equity markets this year.

Market participants now turn to Micron Technology's quarterly earnings due later this week for clues on AI-related memory-chip demand and the outlook for data-center capital expenditure. The results are expected to provide crucial insights into whether the massive spending on AI infrastructure is generating returns sufficient to justify elevated stock valuations.

If the AI selloff proves sustained, continued US Dollar strength could pressure commodity prices further, while a rotation out of growth-oriented equities may broaden into other sectors. The question for investors is whether Tuesday's rout represents a healthy correction in an overextended trade or the beginning of a deeper repricing of AI-related valuations.

This article is for informational purposes only and does not constitute investment advice.