Tech, chip stock sell-off continues as AI bubble fears mount
Among the Magnificent Seven Big Tech stocks, Nvidia (NVDA) was down about 0.8%, and Alphabet (GOOGL, GOOG) stock fell about 0.6%. Amazon (AMZN), Apple (AAPL), and Meta (META) shares fell over 1%.
Chip stocks Advanced Micro Devices (AMD) and Broadcom (AVGO) dropped more than 2%; Micron (MU) shares plummeted more than 5%.
CoreWeave (CRWV), the AI data center company that rents computing power to Microsoft (MSFT) and Meta — making it essentially an AI pure play — also dropped nearly 4%.
Palantir (PLTR), a defense tech stock that's seen a major upswing from the AI boom, sank nearly 2%, extending its recent losing streak.
The rotation out of AI-linked stocks comes as sentiment soured this week on the market for artificial intelligence, fueled in part by a recent report from the Massachusetts Institute of Technology and commentary from OpenAI CEO Sam Altman.
Researchers for MIT's Project NANDA authored a report released this week that said 95% of companies it studied are getting no return on AI. The findings of the report were first detailed by Fortune on Monday.
That report followed commentary from OpenAI's Altman shortly after the ChatGPT-maker finished out its latest multibillion-dollar funding round, with the CEO telling reporters that he believes there's an AI bubble, a diversion from his prior characterizations.
'When bubbles happen, smart people get overexcited about a kernel of truth,' he said. 'Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes."
DA Davidson analyst Gil Luria likened the changing market sentiment to a pendulum.
'This is really just pendulum swinging back,' he told Yahoo Finance on Wednesday.
AI stocks have taken off in recent months after a rocky start to the year. A new, cost-effective AI model from Chinese firm DeepSeek released in January cast doubt on the massive sums of money Big Tech was spending to build out AI infrastructure to power the technology — and sent tech stocks tumbling.
Two rounds of earnings updates from some of the biggest AI plays in the market and more clarity on Trump's trade policies have since quelled those fears.
Investors applauded recent quarterly reports from Big Tech firms Alphabet, Meta, and Amazon, which surpassed Wall Street's expectations as the companies said AI boosted their underlying businesses. That news overrode the fact that those companies also raised their forecasts for spending on AI infrastructure.
'The AI trade was getting so expensive that all it took was some comment from Sam Altman to make the investment community take some profits off the table,' Luria said.
Luria added that 'the reality is that AI still has limited applications' beyond consumers talking to AI chatbots and using the tools as a search engine.
Some AI bulls, however, maintain faith in the technology's ability to fuel markets to new highs.
'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 [Nvidia CEO] Jensen [Huang] and Nvidia,' wrote Wedbush analyst Dan Ives in a note to investors Wednesday.
He added that 'the tech bull cycle will be well intact at least for another 2-3 years given the trillions being spent on AI.'
More will be revealed when leading AI chipmaker Nvidia reports its quarterly earnings results after the bell next week on Aug. 27.
Laura Bratton is a reporter for Yahoo Finance. Follow her on Bluesky @laurabratton.bsky.social. Email her at laura.bratton@yahooinc.com.
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