Technology stocks in the United States tumbled sharply after stronger-than-expected May jobs data triggered a rapid unwind of leveraged positions, sending shockwaves across global markets and pressuring risk assets.
The Nasdaq Composite dropped 4.18% on June 5, its steepest fall since April 2025, while the Philadelphia Semiconductor Index plunged 10.26%, wiping out more than $1 trillion in market value. Losses were concentrated in growth sectors, with the Dow Jones Industrial Average falling 1.35% and the Russell 2000 briefly rising, underscoring the uneven nature of the sell-off.
Strong jobs data resets rate expectations
The U.S. economy added 172,000 nonfarm jobs in May, more than twice market forecasts. The surprise pushed Treasury yields higher, with the 10-year climbing to 4.5% and the two-year to 4.17%, both at their highest levels since February 2025.
Markets briefly began pricing in the possibility of another rate hike, a sharp shift from earlier expectations of easing. The move forced a rapid repricing of assets tied to future growth, particularly technology shares that are sensitive to borrowing costs.
Leverage buildup fuels rapid unwinding
The scale of the decline was amplified by elevated leverage across hedge funds. Goldman Sachs data showed net leverage rose from below 70% to over 80% in two months, nearing the top range of the past five years.
Exposure to information technology surged at a record pace, with net allocations rising 853 basis points in a single quarter. Semiconductor stocks alone accounted for 19% of global hedge fund positioning. At the same time, Citigroup flagged extreme bullish positioning in Nasdaq 100 options, with its internal bear-market checklist hitting the highest level since 2008.
As volatility spiked, automated trading systems accelerated selling. The VIX index jumped roughly 34% to above 20, triggering algorithm-driven liquidation. The selling appeared mechanical rather than sentiment-driven, with pre-programmed thresholds dictating the pace of declines.
Semiconductor stocks lead the downturn
Chipmakers, which had driven much of the market’s gains earlier in the year, suffered the largest losses. Marvell dropped about 16%, Micron fell roughly 13%, and both AMD and Intel declined near 11%. Nvidia slipped around 6%, bringing its market value below $5 trillion.
The pullback followed a strong rally, with the Philadelphia Semiconductor Index up more than 60% year-to-date prior to the reversal.
Broadcom acted as the immediate catalyst. Its forecast for third-quarter AI chip revenue came in at $16 billion, below expectations of $17.2 billion, while its full-year outlook remained unchanged. The lack of upward revisions unsettled traders accustomed to consistently rising guidance, sparking a wave of selling across the sector.
Shock spreads to Asia markets
The sell-off quickly spread to Asia, with South Korea hit hardest. The KOSPI index plunged more than 8% at the open on June 9, triggering a 20-minute trading halt after Samsung Electronics and SK Hynix each fell around 10%.
These two companies represent nearly half of the index’s market capitalization, amplifying the impact. The downturn was intensified by record retail margin debt of 37.74 trillion won and a weakening currency, with the won approaching 1,560 per dollar. Authorities issued a joint statement signaling readiness to stabilize markets.
Taiwan and mainland China stocks also declined as semiconductor and AI supply chain names repriced. Companies tied to high-bandwidth memory, optical modules, printed circuit boards, and servers saw sharper moves, reflecting their sensitivity to AI infrastructure demand.
Rising yields pressure gold and cryptocurrencies
Higher real yields and a stronger U.S. dollar weighed on non-yielding assets. Gold fell more than $100 on June 5, dropping below $4,370 per ounce and erasing its gains for the year, while silver also weakened.
Bitcoin briefly fell below $60,000 before recovering above $63,000 the following week. Weakness had already been building, with spot Bitcoin ETFs recording 13 consecutive days of outflows totaling about $4.4 billion and the Coinbase Premium Index turning negative, indicating reduced U.S. demand.
Fundamentals remain strong despite sell-off
Despite the sharp correction, industry leaders continue to highlight strong demand for AI-related chips. TSMC expects a 25% to 30% supply shortfall by 2026, while Nvidia pointed to ongoing memory constraints that could persist for years. SK Hynix has already sold out its planned 2026 high-bandwidth memory output, and DRAM prices surged roughly 90% quarter-on-quarter in early 2026.
Focus shifts to key economic events
Traders are now watching several upcoming catalysts that could shape the market’s direction:
- U.S. Consumer Price Index data on June 10
- Federal Reserve policy meeting on June 16–17 and updated projections
- Stability of South Korea’s KOSPI after its trading halt
A stronger inflation reading could reinforce expectations of prolonged tight monetary policy, while the Federal Reserve’s updated forecasts are expected to signal a more hawkish stance.
Forced liquidation drives market volatility
The sharp market reaction reflects more than a shift in outlook. Elevated leverage made portfolios highly sensitive to price swings, and once volatility surged, forced liquidation took over. The VIX rise to above 20 triggered systematic selling, turning what began as a repricing into a rapid rout.
The episode highlights how quickly crowded trades can unwind when macro expectations shift. With monetary policy expectations now reset, the near-term direction of markets will depend on whether upcoming data confirms persistent inflation and tighter financial conditions, or allows room for stabilization.
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