US Tech Weakness

Summary - Yesterday’s weakness in US mega-cap tech widened in overseas trade.

South Korea's Kospi lost nearly 10%, the Nikkei fell 3.5% and the NASDAQ opened down 3%, led by a 7% decline in semiconductors.

There wasn’t one specific headline traders pointed to, but rather hand-wringing over the historical boom and bust nature of technology spend outs, as well as a potential hangover from all the AI financing recently raised in both public and private markets.

Bond yields came in along with oil prices amid a continued back and forth between the White House and Iran on their own interpretations of the ongoing peace talks.

The S&P Manufacturing PMI was particularly strong but included the fastest headcount reductions since the Pandemic.

Richmond Fed data missed expectations amid slower new orders growth.

Breadth wasn’t nearly as poor as the indices headline performance indicated, and stock volumes were relatively muted suggesting rotation away from large cap tech continued to occur. - - Overnight - - Tech selloff dominating risk sentiment: US tech weakness from Monday has rolled through into Asia/Europe and is setting a negative tone again for US open.

The Nasdaq closed down 1.3%, led by SpaceX (on its bond issuance) and Google (reports of top AI talent departures), with the Asia tech index falling a further 1.3%.

SpaceX dropped another 16% to close at $155, now below its lowest IPO-day price in pre - notable given the large allocations South Korean and Japanese investors took in the private placement, and SPCX is extending losses in premarket below $150.

Risk-off move was broad: gold, silver, bitcoin and US equity futures unwound all of Monday's US-Iran relief rally, while WTI held its lows around $73/bbl.

The lack of clear Fed guidance from the recent FOMC is amplifying the volatility - - thinks current tech selloff isn't driven by one single event but by the accumulation of quite many small yet highly sensitive cracks - each one quietly undermining the clean narrative that more AI compute automatically equals durable economic value.

Intelligence is shifting from scarcity to spoilage: models keep getting better and more widely used, yet the equity attached to them weakens as the scarce asset moves from raw capability to the controlled conversion of intelligence into clean, net-positive work.

Full data centers, not empty ones, are becoming the bear case - they generate massive activity (tokens, agent loops, reviews, reversals) while enterprises pay for fewer unresolved decisions, creating hidden cleanup debt and friction that the P&L eventually feels.

Google’s talent losses, Meta’s apparent caution on new equity issuance to fund AI Capex, Oracle’s balance-sheet pressures, and xAI openly selling Colossus capacity to Anthropic, Google, and others all signal the same maturing reality: frontier compute now carries real opportunity cost and is increasingly treated as rentable inventory rather than a proprietary moat.

At the same time, Chinese models like GLM, Qwen, DeepSeek and others flood the usable middle market with cheap, good-enough intelligence, accelerating commoditization at the routing and validation layers.

The market could be beginning to price the unbundling: winners will be those who turn abundant intelligence into fewer expensive human decisions, not those with the biggest clusters or prettiest benchmarks. - - Iran pushes back on Vance's narrative: Iran's Foreign Ministry spokesman Baghaei directly contradicted VP Vance's claim that inspectors were being allowed in, stating Iran has no plan to let IAEA inspectors visit the nuclear sites targeted in the conflict.

Aligns with the IAEA's own position that it has been unable to inspect affected facilities (only Bushehr visited recently).

Baghaei added that five parts of the MOU must be fully implemented before any negotiations on the nuclear dossier or IAEA role begin, warned Iran would respond to any Israeli MOU violation (including attacks on Hezbollah in Lebanon), and said the Strait of Hormuz remains open for now but post-60-day arrangements depend on negotiations.

He could not confirm the US claim that unfrozen Iranian funds would be spent on American corn, soy and wheat.

The market has shown limited reaction to reported progress in the Switzerland talks. - - EU PMIs disappoint, services the weak spot: The flash June composites came in soft across the board, with services dragging.

Eurozone Composite was 49.5 (vs 49.2e) but services stayed contractionary at 48.9 for a third month, while manufacturing held up at 51.3.

Germany was the standout weakness: Composite 48.0 (vs 49.7e), manufacturing slipping to exactly 50.0 (lowest since Jan 2026, avoiding a fifth expansion month) and services collapsing to 46.8 - the lowest since Nov 2022.

The UK was similarly mixed, with manufacturing resilient at 53.1 (8th month of expansion) but services dropping into contraction at 48.7 and the composite at 49.4.

ECB commentary leaned cautious on inflation: Lane sees energy prices keeping inflation well above target into H1 2027 and flagged second-round effects, echoed by Escriva and Kazimir on services-price persistence - though the broader market read is that ECB hike expectations are cooling with Lagarde downplaying second-round risks.

The BoE is expected to hold a wait-and-see stance through the summer. - - President Trump signed an executive order updating the National Quantum Initiative, directing the US to deliver a scientifically useful quantum computer by 2028 and mandating post-quantum cryptography migration for high-value federal systems by 2031. - - US - - (US) Pres.

Trump: Iran has fully and completely agreed to highest level Nuclear inspections long into the future (Infinity!!!) [**Note: contradicts Iran Foreign Ministry statements hours ago] - - (HU) HUNGARY CENTRAL BANK (MNB) CUTS BASE RATE BY 25BPS TO 6.00%; AS EXPECTED - - (US) ADP Preliminary Employment Change for 4-weeks ending Jun 6th: +30.8K v +26.5K prior (first pickup in hiri