The Nasdaq stock index, which includes many leading tech companies, has been experiencing significant fluctuations recently. This volatility reflects growing doubts about the value of massive investments in artificial intelligence (AI). Several prominent tech stocks, including Nvidia and Alphabet, Google’s parent company, saw declines for the second consecutive day.
One notable decline was in Micron Technology’s shares, which fell by 12% on Tuesday. This drop drove the Nasdaq index to fall by about 2% in the afternoon. Micron’s share price, which had increased approximately 800% over the past year, serves as a proxy for the larger trend in AI-related stocks, highlighting the enormous valuations these companies have achieved due to increased demand for memory chips from the AI sector.
“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.
Over the past five years, companies globally have invested more than $1 trillion in AI, according to Stanford University’s AI Index Report, with over $580 billion channeled into AI just last year. The large investments are sparking concerns about potential returns, leading to instability in stock markets.
This instability was evident as Alphabet’s stock fell by 5% and SpaceX by 16% on Monday. Asian markets also felt the impact, with notable declines in Korean stocks, including Samsung and SK Hynix, each dropping 12%. This turmoil occurs as AI giants OpenAI and Anthropic consider public offerings, which could rank among the largest IPOs ever. While both companies are generating revenue, their long-term profitability 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.
On Tuesday, the focus was on chip manufacturer stocks, with Intel and Advanced Micro Devices experiencing more than 5% declines. Micron Technology faced the most significant drop amid concerns leading up to its earnings report expected on Wednesday. Analysts are closely watching these earnings for indicators that AI investment cycles are maintaining their momentum.