South Korea's KOSPI index dropped 10% on Tuesday amid signals that the rally in the tech sector could have become overheated. It was the steepest drop in more than three months and comes after a record on Monday.
Market giants Samsung and SK Hynix each fell more than 12%, triggering an index-wide trading halt in the afternoon, Reuters noted. The two companies make up for more than half of the index's market value.
The outlet also noted that the head of the country's market watchdog, Lee Chan-Jin, said the government was too quick to approve leveraged funds tied to some of the most well-known stocks that were introduced last month.
The rout extended across markets around the world. Andrew Slimmon, a senior portfolio manager at Morgan Stanley Investment Management, told CNBC that the "AI beneficiaries are the sell off and I don't think they're expensive, but they're crowded."
"It's captured kind-of the zeitgeist of the momentum traders and when that happens, you're going to have sharp sell offs like we're having. I'd argue it's healthy."
European stocks were trading lower and U.S. futures also plunged before the session opened.
U.S. stocks also fell on Monday, also dragged by chipmakers. The S&P 500 and the Nasdaq Composite fell 0.4% and 1.3%, respectively.
The tech-heavy index was dragged by large tech names, including chipmakers. CNBC Noted that Alphabet shares declined by 5% after top AI officials left the company.
The outlet said that the president of engineering and co-lead of its Gemini models, Noam Shazeer, is leaving to join OpenAI. John Jumper, DeepMind vice president and engineering fellow, said he is leaving as well and joining Anthropic.
Elsewhere, Amazon, Meta and Microsoft also fell. SpaceX stood out, plunging by more than 16%, notching its third straight day of losses and returning close to its opening price of $154.
The company announced a bond sale on Monday, saying it will use the funds to pay for bridge financing and general purpose needs.
CNBC noted that last week there were reports claiming that the company was seeking to raise about $20 billion in the bond sale to also fund its AI plans, which include potentially building data centers in space.
Market watchers are closely waiting for Thursday's inflation reading, with figures expected to raise as a result of energy price increases resulting from the war in Iran.
