Wall Street Turns on AI Rally, Nasdaq Plummets Over 2% as Fed Expectations Shift to Fear

On the 23rd in New York, U.S. equity markets slid across the board amid heavy selling in big-tech and AI names. The S&P 500 fell 1.4% to 7,365.46, while the Nasdaq Composite dropped 2.2% to 25,587.04. The Dow Jones Industrial Average, with its lower tech weighting, declined just 0.1% to 51,666.84, and the small-cap Russell 2000 slid 1% to 2,975.48. Stocks tied to AI, which had driven gains earlier in the year, led the downturn.

Although the Federal Reserve left its policy rate unchanged at 3.50%–3.75% at the June FOMC, the dot plot and Fed officials’ comments signaled a possible rate hike before year-end, and those hints continued to weigh on the market. With traders increasingly pricing in another rate increase this year, growth stocks came under renewed valuation pressure. Economic indicators released that day—such as the Purchasing Managers’ Index—did little to alter sentiment. Investors were also trimming risk ahead of the Personal Consumption Expenditures (PCE) inflation report due on the 25th and the major banks’ stress‐test results scheduled for the 24th.

On an individual stock basis, Micron, ahead of its earnings release, plunged more than 13%, dragging down semiconductor and AI‐infrastructure shares broadly. Asian tech stocks, including Korea’s KOSPI names that had surged on AI optimism, tumbled by roughly 10%, triggering additional selling in New York. Meanwhile, progress in Iran ceasefire negotiations pushed WTI crude down to about $73 per barrel and Brent to around $76, easing some inflation concerns. Yet uncertainty over potential further Fed rate hikes kept volatility elevated, especially among tech-focused stocks.