The AI stock mania that drove markets to record highs is coming apart—and ordinary investors who bought the hype are watching their savings evaporate while Wall Street insiders who cashed out early walk away clean.

A global tech sell-off erased more than $900 billion from SpaceX's peak valuation and dragged markets down across three continents this week, exposing the fragility of a market propped up by seven companies that account for nearly a third of the S&P 500's entire value. The Nasdaq plunged 2.2% on Tuesday, the S&P 500 dropped 1.43%, and the carnage spread to Asia, where South Korea's benchmark Kospi index closed down 10% after chip giants Samsung and SK Hynix each fell more than 12%.

The trigger was straightforward: the Federal Reserve signaled last week it may raise interest rates to tackle rising inflation, and the market finally listened. NBC News reported that inflation fears stemming from the Iran war and the closure of the Strait of Hormuz are driving expectations of more expensive borrowing for the AI infrastructure buildout. The Guardian framed the sell-off as attention simply shifting away from the war and toward AI company fundamentals—but the math is the same either way: cheap money fueled this bubble, and expensive money is deflating it.

SpaceX has become the poster child for the mania's unraveling. After a blistering IPO on June 12 that raised $85 billion, shares peaked at $225 just one week later. They've been falling ever since. Monday alone saw a nearly 17% drop—erasing $400 billion in value, the second-largest one-day wipeout for any stock on record, according to Bloomberg. Then the company announced a $20 billion bond offering on top of the IPO haul, accelerating the sell-off. As Swissquote senior analyst Ipek Ozkardeskaya put it: SpaceX is "jumping on the bond train to fund excessive AI and infrastructure spending," reviving concerns that Big Tech is financing its AI ambitions through mounting debt. Morgan Stanley has estimated AI-related borrowing will surpass $500 billion this year.

Alphabet also took a beating—its worst single day in over a year—after high-profile AI researchers left the company. Shares dropped 5% Monday and kept sliding Tuesday. The so-called "magnificent seven" stocks were all down in pre-market trading, with Nvidia and Tesla hit hardest.

JPMorgan traders summed it up in a note: "Gravity strikes."

That's easy for them to say now. The question is who got out before gravity arrived—and who was told to keep buying.