US Tech Stocks Decline Amid Growing Skepticism on AI Boom’s Long-Term Gains
US technology stocks experienced significant declines following increased concerns about the sustainability and genuine returns of the artificial intelligence (AI) boom driving market gains this year. The selloff highlights unease among investors about whether the AI-driven surge can continue to justify sky-high valuations that have made some companies the world’s most valuable.
On Tuesday, shares of Nvidia, the semiconductor giant that became the world’s first $4 trillion company largely propelled by AI enthusiasm, dropped 3.5%. Other prominent players were hit harder, with software specialist Palantir plummeting 9.4% and chip designer Arm falling 5%. The tech-focused Nasdaq Composite index declined 1.4%, marking its biggest single-day drop since early August, while the broader S&P 500 fell 0.7%.
Global markets mirrored this downturn, with European and Asian indexes, such as Japan’s Nikkei 225 and South Korea’s Kospi, slipping 1.5% and 0.6% respectively. Futures markets suggest a cautious opening for Wall Street as the concerns linger into Wednesday trading.
The market movement was partially fueled by a sobering report from a Massachusetts Institute of Technology (MIT) research team released earlier this week. The study revealed that approximately 95% of organizations investing in generative AI—the technological foundation behind many of the recent AI advances—are seeing no return on their investments so far. This sobering statistic has increased pressure on the most hyped AI stocks, calling into question whether the rapid growth seen in recent months is sustainable.
Despite the market jitters, optimism about the long-term potential of AI technology remains among many investors and experts. For example, Wall Street analysts continue to express confidence that the AI boom still has significant runway for growth. However, industry insiders echo more caution; OpenAI CEO Sam Altman recently compared the current AI excitement to the 1990s dotcom bubble. Altman acknowledged that while the enthusiasm may border on excessive, AI represents a transformative technology that will have lasting importance.
Altman warned that some investors might face losses as the hype normalizes but emphasized that the long-term value creation from AI surpasses short-term market fluctuations. He highlighted that OpenAI plans to invest trillions of dollars in data center infrastructure soon, indicating ongoing substantial commitments to AI development.
Moreover, major tech companies such as Microsoft, Alphabet, and Meta reported strong earnings surpassing expectations, with no indication of pulling back on AI investments. This suggests that while market volatility exists, big tech’s commitment to AI innovation remains solid.
In summary, the recent pullback in US tech stocks reflects growing market caution and a reevaluation of AI’s immediate financial returns against its longer-term transformative promise. Investors appear to be recalibrating expectations as research questions the short-term payoff of AI investments, even as confidence in the technology’s ultimate significance remains.