The S&P 500 lost 107 points, or 1.4 percent, to finish at 7,365. The Nasdaq fell 579 points, or 2.2 percent, to end at 25,587. The Dow Jones industrial average finished down 45 points, or 0.1 percent, at 51,666.

The Nasdaq was hit by the big drops in semiconductor shares. Both Micron Technology and Sandisk fell more than 13 percent.

Angelo Kourkafas from Edward Jones said the pullback was prompted by concerns that stock valuations are out of hand, rather than a re-think in the need for the artificial intelligence boom that has hit record heights.

"There are some concerns about sentiment valuations and positioning, I would say, more so rather than a notable shift in the AI fundamental story," Kourkafas said.

"The market likes to take two steps forward, one step back, and that's the step-back phase."

After falling the last three days, SpaceX early in the session retreated below US$150 -- the level at which it began trading on June 12, its first day on the Nasdaq.

But SpaceX shares later reversed course, finishing at US$156.11, up 1 percent for the day.

Still, the announcement of a bond offering by Elon Musk's rocket company and satellite operator added to investor unease.

SpaceX "jumping on the bond train to fund excessive AI and infrastructure spending revives earlier concerns that Big Tech may be spending too much on AI infrastructure and increasingly financing that spending through debt," said Ipek Ozkardeskaya, senior analyst at Swissquote bank.

"When you have markets that go up in a straight line... they tend to experience sharp moves in the opposite direction at unpredictable times," said Steve Sosnick of Interactive Brokers.

"This is what happens when markets get stretched."

Oil prices slipped, adding to recent falls as more tankers return to the Strait of Hormuz following a US-Iran deal aimed at ending the Middle East war.

Traffic on Monday through the Strait of Hormuz reached the highest level since the start of the Middle East war, according to maritime tracking data from analytics platform Kpler. (AFP)



Edited by Cecil Wong