Updates with prices

By Johann M Cherian and Twesha Dikshit

June 23 (Reuters) - Futures tracking the tech-heavy Nasdaq fell more than 2% on Tuesday, leading declines on Wall Street, as concerns about looming U.S. rate hikes and debt-backed corporate spending on AI weighed on investor sentiment.
The weakness follows a sharp selloff in U.S. tech heavyweights in the previous session, driven by doubts over hyperscalers' heavy AI spending, amid elevated valuations and high borrowing costs.

Mega-cap names dropped in premarket trading, with Nvidia NVDA.O and Alphabet GOOGL.O down nearly 3% each, while chipmakers Intel INTC.O, Marvell Technology MRVL.O and Advanced Micro Devices AMD.O fell between 6.3% and 8.2%.

"The move looks more like a sentiment-driven correction than a fundamental shift in the AI and earnings narrative, but it highlights how dependent market leadership has become on a relatively small group of growth-focused stories," said Daniela Hathorn, senior market analyst at Capital.com.

Shares of Elon Musk's SpaceX SPCX.O logged their biggest single-day drop on Monday since their trading debut. It became the latest megacap to tap the bond market following a blockbuster IPO earlier this month. The stock was down 4.2% in premarket trading.

"SpaceX is not yet part of the Nasdaq indexes, but the fact that it is 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 market analyst at Swissquote Bank.

At 06:42 a.m. ET, Dow E-minis YMcv1 were down 297 points, or 0.57%, and S&P 500 E-minis EScv1 were down 113 points, or 1.5%. Nasdaq 100 E-minis NQcv1 were down 891.75 points, or 2.91%.

Futures tracking the rate-sensitive Russell 2000 Index RTYcv1 fell 1.7%. The CBOE Volatility Index .VIX, Wall Street's fear gauge, was at an over one-week high, climbing 2.78 points to 20.06.

Traders expect the U.S. Federal Reserve to hike borrowing costs by a total of 50 basis points by December, according to the CME Group's FedWatch Tool, up from one 25-basis-point hike two weeks ago, as investors price in hawkish monetary policy under new Chair Kevin Warsh.

The yield on the short-term 2-year Treasury note US2YT=RR slipped about 4 bps to 4.19%. In the previous session, the yield touched its highest point since February 2025.

After a strong rally earlier this quarter in the aftermath of the Middle East ceasefire, concerns over stretched valuations in AI-related stocks have resurfaced.

Chip stocks advanced on Monday, lifting the Philadelphia SE Semiconductor Index .SOX to a fresh record high, up roughly 106% so far this year. Micron's MU.O results on Wednesday could offer some clues on the outlook for the memory and AI chip sector.

Micron MU.O tumbled 8.9%, while Sandisk SNDK.O and Western Digital WDC.O fell 9.6% and 7.8%, respectively.

Investors are keeping a close eye on developments in the Middle East after the U.S. waived sanctions on Iran for 60 days after the first round of talks under a nascent peace deal, with U.S. President Donald Trump saying he will "do what I have to do" if Iran does not stick to its side of the agreement.

Later in the day, attention will turn to a batch of private surveys on June business activity, ahead of the closely watched Personal Consumption Expenditures Index data, the Federal Reserve's preferred inflation gauge, on Thursday. Economists expect the price index to come in at about 4.1%, more than double the central bank's target.