U.S. Tech Stocks Plummet Amid Growing Concerns Over AI Boom Sustainability
U.S. technology stocks faced a sharp decline on Tuesday, with a 3.5% drop marking the steepest sell-off in months. The slide was primarily driven by mounting skepticism around the commercial viability of artificial intelligence (AI) technologies and fears that the AI market is entering a bubble phase reminiscent of the dot-com era.
The sell-off was led by AI-focused companies and digital currency assets, which saw significant downward pressure amid growing caution among investors. Major AI-linked stocks posted notable losses: Nvidia dropped 3.5%, Palantir slumped 9.4%, while defensive sectors like utilities gained as investors sought refuge from riskier bets.
Contributing to the negative sentiment was a recent report from MIT revealing that 95% of organizations investing in generative AI had seen no financial returns to date. This sobering statistic has questioned the immediate profitability and business impact of AI-related technologies in the broader market.
Adding to the concern, Sam Altman, CEO of OpenAI, a leading AI research firm, publicly compared the current enthusiasm around AI to the dot-com bubble of the late 1990s and early 2000s. Altman’s cautionary remarks underscored the risk of inflated valuations driven by investor hype rather than sustainable growth fundamentals.
Industry experts like Erik Gordon, a professor specializing in entrepreneurship and technology markets at the University of Michigan’s Ross School of Business, have also warned that the AI boom might culminate in a crash that dwarfs the dot-com bust in scale and investment losses. Gordon pointed to the recent poor performance of AI infrastructure companies such as CoreWeave, whose shares plunged roughly 30% over two days—wiping out approximately $23 billion in market capitalization—highlighting the fragility in this new technological segment.
However, not all views are pessimistic. Some investors, including Kevin O’Leary, argue that unlike the dot-com era, which was marked by speculation without clear revenue models, today’s AI technologies demonstrate measurable productivity benefits that justify some of the market optimism.
The recent market turbulence has led investors to monitor key upcoming events for clues on the sector’s trajectory. The Jackson Hole symposium, a high-profile gathering of economic and financial leaders, and upcoming Nvidia earnings reports are expected to provide insights into the sustainability and profitability of AI investments.
Meanwhile, the sell-off in tech shares is mirrored by declines in cryptocurrencies, emphasizing the interconnected nature of innovation-driven markets and the heightened caution among market participants seeking to avoid a repeat of speculative bubbles.
As the AI sector continues to evolve, market watchers remain divided on whether the current downturn signals a necessary market correction, a deeper industry challenge, or simply a pause before renewed growth.