US technology shares fell sharply on Thursday as investors grew uneasy about whether the huge sums companies are pouring into artificial intelligence can be sustained. The Nasdaq Composite, which is dominated by firms tied to the AI boom, dropped 2.6 percent. It was the index’s steepest fall since it tumbled 4.2 percent on June 5.
The broader S&P 500 slid 1.21 percent, its biggest decline since a 1.52 percent drop on July 29.
Magnificent 7 firms post heavy losses
Every member of the so-called “Magnificent 7” except Apple suffered substantial losses. Those seven companies account for more than a third of the overall market.
Meta fell almost 7 percent after lifting its projected capital spending for this year to between $135bn and $145bn in its latest earnings report. The Facebook parent’s net profit also came in below expectations. Amazon shed 4.6 percent, Nvidia 4.4 percent, Tesla and Alphabet 3.1 percent each, and Microsoft 2.2 percent.
Chipmakers and oil prices add to pressure
The selling spread to other major tech names. Intel and Advanced Micro Devices each fell about 8 percent, while Broadcom slid 4.3 percent.
Oil prices have also weighed on sentiment since February, which markets linked to the fallout from the US-Israel war on Iran. Brent crude futures rose 4 percent on Thursday and kept climbing on Friday morning, moving above $114.20 a barrel, the highest level since May.
Major Asian markets opened lower on Friday, following the losses on Wall Street. Japan’s Nikkei 225 fell more than 2 percent in morning trading before recovering some ground, while South Korea’s KOSPI dropped as much as 3.5 percent. Hong Kong’s Hang Seng Index fell about 0.5 percent.
Analysts split over AI bubble risks
Jay Goldberg, a senior analyst at Seaport Research Partners in San Francisco, said the market swings appeared to be driven more by sentiment than by underlying fundamentals. “In short, nothing has changed. Investors have just decided to be afraid this week,” he said. “It’s just a giant wall of worry.”
Goldberg added that “there are legitimate concerns about the AI trade, but this level of shift in the markets is driven much more by investor sentiment than any tangible reason.”
The scale of tech companies’ AI investment has fuelled debate over whether a bubble is forming, similar to the one that preceded the 2000 dot-com crash. Some Wall Street analysts see current spending on datacentres and graphics processing units as unsustainable. Others argue AI will transform society to a degree that justifies the enormous sums involved.
Technology insights company Gartner forecasts global AI investment will reach $2.7 trillion in 2026 and $3.6 trillion in 2027.
