Chip-led selloff pulls U.S. stocks lower as AI valuation doubts spread

U.S. equities closed the week in the red on June 27, pressured by continued weakness in semiconductor shares, Bloomberg reported. A University of Michigan survey showed long-term inflation expectations fell more than expected, easing fears of additional rate hikes, but the data did little to counter the persistent selling in chip stocks. Steve Sosnick, chief strategist at Interactive Brokers, said the S&P 500 briefly moved into positive territory during the session before the advance quickly faded, echoing several failed rebound attempts seen over the past week. Concerns over stretched AI valuations that first dominated Asian trading have increasingly carried into U.S. markets. Two well-known Chinese hedge funds warned that AI-related stocks are in a bubble that could burst. SoftBank Group shares also declined after The New York Times reported that OpenAI may delay a potential IPO until 2027. In South Korea, the Kospi triggered a trading halt for the second time this week after a sharp drop in chip shares, before paring part of the losses. Flow data compiled from U.S. banks showed investors pulled $8.5 billion from U.S. equities, marking the first net outflow in three months. Cameron Dawson, chief investment officer at Newedge Wealth, said a key issue is whether markets will remain patient enough to wait for returns on the massive spending programs underway at leading cloud providers. Richard Reyle, chief investment officer at Questar Capital Partners, said he would not buy large-cap tech or AI stocks at current levels, arguing their dominance is fading; he noted that the MAG7 and Bitcoin peaked nine months ago and have yet to recover. In energy markets, oil tanker traffic through the Strait of Hormuz has continued and crude prices have remained lower. Brian Jacobsen, chief economic strategist at Annex Wealth Management, said the peak in energy prices has likely passed, creating room for overall inflation to cool even though price pressures have not fully disappeared.