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Tech stocks are experiencing a significant decline as investors question whether the massive spending on artificial intelligence will actually pay off.
Major AI-focused companies like Nvidia and Alphabet (Google’s parent company) have seen their stock prices fall for the second consecutive day.
The biggest loser on Tuesday was chipmaker Micron Technology, whose stock dropped more than 13%. This widespread decline pushed the tech-focused Nasdaq index down by over 2%.
Micron’s performance illustrates the current market sentiment perfectly. The company’s stock price has surged nearly 800% over the past year due to strong demand for memory chips used in AI infrastructure. This dramatic increase highlights how inflated valuations have become for AI-related companies.
“The market just continues to oscillate between ‘AI is going to be great and increase productivity and all these companies are going to win’ and ‘AI is a big waste of time and it’s not worth the return on investment at all and this is all one big bubble,'” said Gil Luria, head of technology research at investment firm D.A. Davidson.
More than $1 trillion invested. “When will we see profits?”
Investment in AI has reached extraordinary levels. According to Stanford University’s AI Index Report, corporations have poured more than $580 billion into AI development globally over the past year, adding to the $1 trillion invested in the four years before that.
Stock market uncertainty has grown because of these concerns. Alphabet’s stock fell 5% on Monday, while SpaceX lost 16%.
This volatility extended to Asian markets, where South Korean stocks took the hardest hit. Samsung and competitor SK Hynix each experienced 12% declines.
The timing is particularly significant as two major AI companies, OpenAI and Anthropic, are preparing to offer their stocks to the public through what could become two of history’s largest initial public offerings.
Although OpenAI and Anthropic are currently generating revenue, whether generative AI will remain profitable long-term remains uncertain.
“The market is trying to kind of digest all this and saying, ‘Are we going to start to see returns?'” said Mark Vena, CEO of SmartTech Research.
Tuesday saw a sharp decline in chipmaker stocks. Intel and Advanced Micro Devices both fell around 6%.
Micron suffered the most severe losses, driven largely by investor anxiety ahead of the company’s earnings announcement scheduled for Wednesday. Market analysts are closely monitoring Micron’s financial results as a potential indicator of whether the AI investment boom will continue growing.
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