A sharp selloff in chip and AI stocks is rattling markets and raising fears of a bubble that could tip the US into recession — bad news for investors and the broader economy.

• AI and chip stocks got hammered after a strong jobs report made traders bet the Fed will raise interest rates instead of cutting them.
• Higher rates hurt AI companies because they borrow huge sums to build data centers, and that borrowing gets more expensive.
• Ray Dalio called it "classic bubble stuff" — money piled into one risky, popular sector with stretched valuations while bonds now look safer.
• Over $1.2 trillion in market value vanished in a single day, led by Micron, Super Micro, and SanDisk; the data center buildout now costs more than all US public infrastructure spending.
• Voters are sour on Trump's economy, with 68% disapproving of his handling of inflation, and the Iran energy shock is keeping gas, jet fuel, and grocery prices high.

Outlook: If the AI bubble keeps deflating, so much wealth is tied to these stocks that a deeper crash could drag the whole economy into recession.