US tech stocks slide after Altman warns of ‘bubble' in AI and MIT study doubts the hype
Investors' long-running enthusiasm for artificial intelligence showed signs of faltering late Tuesday and early Wednesday morning as tech stocks tumbled. The tech-heavy Nasdaq declined more than 1.2% this morning.
Nvidia, fresh off becoming the world's first $4 trillion company, sank 3.5%, while Palantir slid nearly 10%. The sell-off appeared to be sparked in part by an MIT report that claimed 95% of companies investing in generative AI are seeing no returns, and was potentially deepened by earlier comments from OpenAI's Sam Altman suggesting investors may be caught in an AI bubble. Late last week, Altman drew a parallel between today's AI frenzy and the 1990s dotcom bubble, when internet company valuations spiked dramatically before crashing.
And while the MIT study attributed failures to corporate 'learning gaps' and flawed integration rather than actual AI model quality, the market reaction highlights growing concerns about AI's commercial viability.
The Nasdaq logged its steepest drop since August, and the rout quickly spread overseas. Korea's SK Hynix, one of Nvidia's key suppliers, lost 2.9%, while chip giant TSMC slipped 4.2%. SoftBank, long bullish on AI, cratered more than 7%. However, Alibaba and Tencent barely dipped, and China's chipmaking champion SMIC even popped 3%.
'Tech stocks were under pressure yesterday, led by AI poster child stocks Palantir and Nvidia as investors worry the tech rally is due for a pullback/correction with the constant valuation arguments front and center,' Wedbush's Dan Ives wrote in a note on Tuesday. 'We are still in the early days of the AI Revolution as the use cases are just starting to massively expand as more companies recognize the value creation being driven by a handful of tech companies led by the Godfather of AI Jensen and Nvidia.'
Concerns that investment in AI is racing ahead of sustainable growth are not new. High-profile figures, including Alibaba cofounder Joe Tsai and Bridgewater Associates founder Ray Dalio, have cautioned against the pace of the boom.
Dalio has also likened today's Wall Street cycle to the run-up to the dotcom crash of the late 1990s. 'There's a major new technology that certainly will change the world and be successful. But some people are confusing that with the investments being successful,' he told the Financial Times earlier this year.
Others see the risks as even greater. Apollo Global Management chief economist Torsten Slok argued last month that the AI surge could eclipse the internet bubble of the 1990s, pointing out that the 10 largest companies in the S&P 500 are now more overvalued relative to fundamentals than they were at the height of the dotcom era.
This story was originally featured on Fortune.com
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
25 minutes ago
- Yahoo
Nasdaq Boots Windtree a Month After $700M BNB Treasury Pivot Fails to Lift Stock
Windtree Therapeutics, a Pennsylvania-based drug developer, is being delisted from Nasdaq, just over a month after its $700 million pivot into a digital treasury firm focused on Binance's BNB token failed to boost its stock above the exchange's requirements. In an SEC filing published Tuesday, Windtree confirmed trading of its stock on Nasdaq would be suspended at the open on Thursday, August 21, for failing to maintain the $1-per-share minimum bid price. Windtree shares are down 77% on the day to just $0.11. Windtree listed its stock on Nasdaq in May 2020 but has repeatedly struggled to meet listing standards. The exchange moved to suspend Windtree's shares after several bid-price violations since at least June 2022, according to a 2023 SEC filing. Its third and most recent deficiency warning was handed down in December last year. Windtree and Nasdaq did not immediately return Decrypt's request for comment. Late last month, Windtree announced that it would commit and buy up to $700 million in Binance's BNB token, just a day after that crypto hit a new all-time high. Trump Family-Backed Thumzup to Acquire Dogecoin Mining Company While Windtree briefly regained its compliance earlier in March this year, it later lost course as a turbulent pullback in the crypto market began rolling over the past week. Several publicly-listed treasury companies' shares have been diving or slowing in lockstep, including stock from KindlyMD, SharpLink, Coinbase, and Strategy, which hit a 4-month low on Wednesday amid a broader crypto stock slump. As a result of the suspension, the company is moving to the over-the-counter market under the same ticker, WINT. Unlike Nasdaq, which imposes strict listing standards such as minimum bid prices and equity thresholds, OTC venues operate with looser requirements and typically provide less liquidity and visibility. Ethereum Treasury Companies Could Buy 10% of All ETH: Standard Chartered "Distressed firms face a structural mismatch with DAT models,' Ryan Yoon, senior analyst at Tiger Research, told Decrypt. 'While they may initially raise funds despite lacking credibility, subsequent capital raises become increasingly difficult as market skepticism grows." Digital asset treasuries rely on "premium-based funding, but struggling companies can't sustain NAV premiums long-term," Yoon said. Net asset value, or NAV, is the total value of a company's assets minus its liabilities, expressed on a per-share basis. It shows whether a company's stock price is higher or lower than the value of its total assets, including those that aren't from digital assets. "This creates a reverse flywheel during market downturns: asset decline → forced liquidation → further decline," Yoon explained. For one, Yoon points to Michael Saylor's Strategy as having a "powerful narrative in crypto markets" that has created "a template that struggling public companies attempt to replicate." Yet "unlike established DAT firms with operational frameworks," financially struggling companies suddenly pivoting to become digital asset treasury firms "typically lack substance beyond the narrative itself," Yoon said. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Business Insider
30 minutes ago
- Business Insider
SU Group announces 1-for-10 reverse stock split
SU Group (SUGP) 'announced that it will effect a 1-for-10 reverse stock split of its ordinary shares, par value HK$0.01 per share, an increase in its authorized share capital, and an alteration to its share capital structure. The Share Consolidation is primarily intended to bring the Company into compliance with the $1.00 minimum bid price requirement for maintaining its listing on Nasdaq. There is no guarantee the Company will meet the minimum bid price requirement.' Elevate Your Investing Strategy: Take advantage of TipRanks Premium at 50% off! Unlock powerful investing tools, advanced data, and expert analyst insights to help you invest with confidence.
Yahoo
36 minutes ago
- Yahoo
OpenAI CEO Sam Altman says that export controls alone won't hold back China's AI ambitions — 'My instinct is that doesn't work'
When you buy through links on our articles, Future and its syndication partners may earn a commission. OpenAI CEO Sam Altman has said in an interview that the U.S. could be underestimating China's progress and capability in artificial intelligence. CNBC quoted Altman saying that export controls alone likely aren't a reliable solution and that he's worried about America's biggest rival since the Cold War. 'There's inference capacity, where China probably can build faster. There's research, there's product; a lot of layers to the whole thing,' Sam told CNBC. 'I don't think it'll be as simple as: Is the U.S. or China ahead?' Altman is the second CEO of a major tech company that has questioned the effectiveness of export controls. Nvidia CEO Jensen Huang has said time and again that this policy was a failure, claiming that stopping China from getting AI chips like the Nvidia H20 and AMD MI308 is stifling the U.S.'s economic and technological leadership. It's argued that despite the numerous bans, China was still able to develop advanced AI LLMs, like DeepSeek. 'My instinct is that doesn't work,' Altman added. 'You can export-control one thing, but maybe not the right thing… maybe people build fabs or find other workarounds.' Even if Washington fully banned the export of all AI chips to Beijing, Chinese companies would still be able to get their hands on them through the black market. Just last quarter, it's alleged that at least a billion dollars' worth of banned Nvidia GPUs have entered China, with some smugglers even advertising that they can get their hands on the B300 even before it has officially launched. Despite this, Beijing is encouraging its companies to move away from Nvidia. Chinese state media branded the H20 as unsafe and outdated, instead urging companies to rely on domestic hardware. This might be a difficult task, though, especially as Nvidia's product stack is what gives it an advantage over its competitors. And even though its homegrown chips aren't as powerful as what Nvidia offers, it can overcome this limitation through sheer brute force. This won't be a problem for the country, too, as it has ample electricity production to cover the power demand of its burgeoning AI industry — something that the U.S. is having trouble keeping up with. Follow Tom's Hardware on Google News to get our up-to-date news, analysis, and reviews in your feeds. Make sure to click the Follow button.
