SpaceX shares closed below their $150 IPO price for the first time as a broader tech selloff hit the Nasdaq. The downturn follows concerns over debt-funded AI spending, rising oil prices due to regional conflict in the Strait of Hormuz, and hawkish signals from the Federal Reserve.
SpaceX Market Performance and Tech Sector Declines
The rocket manufacturer SpaceX saw its stock drop 6.8% in recent trading, marking its first close below the $150 opening price established during its June 12 initial public offering. This decline occurred on a difficult day for technology stocks, with the Nasdaq composite falling 1.2%. The broader market also saw losses, as the S&P 500 declined 0.4% and the Dow industrials edged lower by 0.2%.
The pressure on technology stocks is not isolated to SpaceX. Chip giant Samsung reported a difficult session, with shares dropping nearly 7% despite projecting a 19-fold surge in quarterly earnings. Investors appeared unimpressed by the forecast, leading to a global selloff in chip-related equities. In South Korea, the benchmark Kospi index lost nearly 5% in response to the news.
Bubble Risk Indicators and Valuation Concerns
Market analysts are increasingly scrutinizing high valuations in the technology sector, with some experts warning that parts of the U.S. market may be experiencing a speculative bubble. The BofA Global Research Bubble Risk Indicator currently scores the PHLX Semiconductor Sector at 0.91 and the Technology Select Sector at 0.82, where a score of 1 signals extreme bubble-like price action.
Oliver Shale, investment specialist for the U.S. at Ruffer, stated that the market outlook must be viewed through the lens of valuations, positioning, and sentiment.
Valuation metrics remain at historic highs. The Buffett Indicator, which measures total U.S. stock market capitalization against gross domestic product, reached 218% in the first quarter, sitting just below the record high of 219% recorded in the prior quarter. Additionally, the S&P 500 price-to-sales ratio is currently 3.22, significantly higher than its long-term average of 1.84.
Mark Spiegel, managing member and portfolio manager at Stanphyl Capital Partners, noted the challenges in the current market environment.
While the S&P 500 price-to-earnings ratio is at 20.2 times expected 12-month earnings—well below the 25.2 seen during the dotcom bubble—skepticism remains regarding the sustainability of current earnings growth. Some investors argue that the E in these ratios is itself an unsustainable bubble, particularly as companies continue to pour billions into artificial intelligence infrastructure without definitive proof of long-term returns.
Geopolitical Risks and Energy Market Volatility
Beyond tech-specific concerns, investors are reacting to shifts in energy prices. Crude oil markets have tightened following a U.S. decision to revoke Iran’s license to sell oil, a measure taken in response to Iranian attacks on vessels in the Strait of Hormuz. Brent crude recently traded near $75.75 a barrel, up from approximately $72 at Monday’s close.
There is growing anxiety regarding how such regional conflicts could affect global shipping lanes.
Institutional Shifts in Tech Weighting
Reflecting the cautious atmosphere, some major financial institutions are adjusting their exposure to the technology sector. Citi strategist Scott Chronert recently downgraded the bank’s tech weighting recommendation to market weight from overweight. Chronert noted that while semiconductor earnings momentum remains significant, the current environment makes it difficult to see how everyone involved in the AI and technology path will succeed.
Despite the downgrade, Chronert maintains a bullish outlook on equities overall, citing an 8,100 year-end target for the S&P 500. He expects that a rotation away from tech stocks, combined with anticipated weaker oil prices in the third quarter, may help broaden market participation. Currently, the bull-bear spread in the American Association of Individual Investors Sentiment Survey stands at 8.8%, which remains well below the 44.2% peak, suggesting that while sentiment is bullish, it has not yet reached extreme levels of euphoria.
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