Tech selloff stirs bubble fears as Nasdaq sheds over $1 trillion in days

The Nasdaq Composite lost more than $1 trillion in market value over the span of a few days last week, and the word nobody in tech wants to hear is making the rounds again: bubble.

Between June 23 and June 26, the index dropped approximately 2.2% to 2.5% as investors reconsidered whether the AI-fueled rally that has dominated markets for the better part of two years still has legs. Chip stocks were hit especially hard, falling 5.3% in a single session.

The S&P 500’s price-to-sales ratio now sits at 3.22, which is nearly 75% above its long-term average of 1.84. The Buffett Indicator, which measures total market capitalization relative to GDP, hit 218% in the first quarter of 2026.

The AI spending problem

Morgan Stanley estimates that AI-related corporate borrowing could exceed $500 billion by the end of 2026. Companies like Nvidia, Microsoft, Alphabet, Broadcom, and Micron are pouring capital into data centers, chips, and infrastructure at a pace that makes the fiber-optic buildout of the late 1990s look quaint.

Bank of America’s Bubble Risk Indicator has flagged heightened risk specifically in the semiconductor and technology sectors.

Concentration risk and the Magnificent Seven

The so-called “Magnificent Seven” tech companies now account for roughly 30% of the S&P 500’s total market value. That level of concentration means the broader index is essentially a leveraged bet on a handful of names.

What this means for investors

The Federal Reserve has adopted an increasingly hawkish posture, which raises borrowing costs for precisely the kind of capital-intensive AI buildout that has been driving tech valuations higher. Higher rates make future earnings less valuable in present terms, and many of the biggest AI plays are priced on earnings projections that stretch years into the future.

Geopolitical tensions add another layer of uncertainty. Supply chains for advanced semiconductors remain concentrated in a small number of countries, and any disruption could amplify the kind of volatility that spooked markets last week.

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