Tech Stocks Slide As Nasdaq 100 Nears Correction Driven By AI Spending Fears
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KEY POINTS
- The tech-heavy Nasdaq-100 index approached correction territory, dropping roughly 10% from its June record high.
- South Korea’s Kospi index suffered a rapid bear-market decline driven by the volatility of AI chipmaker stocks.
- Aggressive capital expenditures by tech titans have triggered intense scrutiny over return on investment ahead of upcoming earnings reports from Microsoft, Meta, and Amazon.
Severe declines in semiconductor stock prices are pushing major indexes downward, with the tech-heavy Nasdaq-100 nearing official correction territory of a 10% decline from its most recent record high.
The reversal in market sentiment comes as investors increasingly question whether or when trillions of dollars poured into AI-related investments will generate returns.
The Nasdaq-100’s drawdown occurred over roughly 40 trading days, a stark contrast to the index’s previous correction earlier this year which unfolded over more than 100 sessions.
Bloomberg
As one of the biggest beneficiaries of corporate AI investment, the semiconductor sector has become the focal point of AI-driven worries from investors. The Philadelphia Semiconductor Index (SOX) dropped 24% from its peak while the stock prices of chipmakers and AI infrastructure suppliers have also suffered steep losses:
- Micron Technology and AMD each fell more than 8%.
- Sandisk dropped 14% in a single session.
- Dell Technologies declined more than 8% amid concerns over server demand.
The selloff has gone global, with Samsung Electronics and SK Hynix both falling more than 15% and pushing South Korea’s Kospi index into “one of its fastest-ever bear-market drops,” Bespoke Investment Group analysts wrote, according to NBC.
JPMorgan estimates global enterprise spending on AI infrastructure could reach approximately $870 billion by the end of 2026, representing a 77% increase from the previous year. In its earnings report last week, Alphabet posted its first-ever negative quarterly free cash flow as a public company while reporting $205 billion in capital expenditure plans, largely tied to AI infrastructure investments, sparking a sharp selloff in its shares.
BofA Global Research
Apple, which has avoided spending hundreds of billions of dollars on AI development, saw its stock rise 1% on Tuesday and briefly pass the $5 trillion mark in market capitalization for the first time, CNBC reported. It also pulled ahead of Nvidia as the world’s largest public company.
With Microsoft, Meta, and Amazon due to report earnings soon, investors will be looking for signs that the massive AI spending boom is beginning to generate measurable returns.
