Tech stocks suffered a significant blow this week, raising questions about whether investor enthusiasm for artificial intelligence (AI) is starting to wane. The Nasdaq Composite Index, a key barometer of the tech sector, plummeted by 3% – its steepest decline since April 2019 when President Trump unveiled his controversial tariff plan.
Adding fuel to the worry, leading players in the AI space took some of the hardest hits. Palantir Technologies saw its stock price drop by a jarring 11%, Oracle fell 9%, and even Nvidia, a titan in graphics processing units essential for AI development, lost 7% of its value. Notably, these declines came despite recent earnings reports from tech giants Meta and Microsoft signaling continued, significant investments in AI. Both companies reported around 4% drops.
“Valuations are stretched,” explained Jack Ablin, chief investment officer at Cresset Capital, to the Wall Street Journal. “Just the slightest bit of bad news gets exaggerated…and good news is just not enough to move the needle because expectations are already pretty high.”
While economic headwinds like the ongoing government shutdown, declining consumer confidence, and widespread layoffs undoubtedly contributed to the broader market downturn, the tech-heavy Nasdaq’s disproportionate fall suggests a specific chill in AI-related investments. The less tech-dependent S&P 500 and Dow Jones Industrial Average experienced more modest declines of 1.6% and 1.2%, respectively.
This week’s volatility begs the question: Has the honeymoon phase for AI on Wall Street come to an end?
