new york
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Tech stocks were under pressure this week as Wall Street AI enthusiasm slowed down and investors adjusted their portfolios after a strong summer gathering.
The NASDAQ Composite fell 0.67% on Wednesday after sliding 1.46% on Tuesday. The Tech Heavy Index was on track to earn profits for weeks in a row.
Meanwhile, the broader S&P 500 fell 0.24%, recording consecutive losses on the fourth day. The Dow hovered around the flatline.
Tech stocks have steadily recovered in recent months, lifting the S&P 500 and Nasdaq to a record-high winning streak. Wall Street is currently taking a breath, but optimism about the AI boom is facing friction.
AI trade star Palantir (PLTR) fell 1.1% on Wednesday after a 9.35% decline on Tuesday. Meanwhile, Nvidia (NVDA) fell 0.14% on Wednesday after slipping 3.5% on Tuesday.
“Investors were turning from high-producing tech stocks and reflected new jitter around the sustainability of AI trade,” UBS Global Equity Director Ulrike Hoffman Buchardi said.
Investors will also be speaking at the Jackson Hole Economic Symposium, with Federal Reserve Chairman Jerome Powell ahead of the market's significant day on Friday.
Rob Howarth, senior investment strategy director for the US Bank Asset Management Group, told CNN.
Powell's careful speech on Friday could provide a signal about the Fed's potential rate-cut path, becoming a key inflection point for the market after recording the rise over the past few months.
The excitement around AI has driven the market in recent months, driven by robust corporate revenues and enormous spending by companies like Meta and Microsoft.
But Wall Street enthusiasm was tested this week after Openai CEO Sam Altman said he thought the market might be in the bubble.
“Are we at a stage where the entire investor is overly excited about AI? My opinion is yes,” Altman told reporters last week.
Openai's chief also said he believes AI will provide value to the economy. “Is AI the most important thing that will happen for a very long time? My opinion is yes too,” he said.
Also, MIT researchers published a report on Monday detailing how the majority of companies testing new generation AI tools view zero returns.
Although there was no explicit catalyst for a decline in Tech and AI stocks this week, investors said Altman's comments and MIT report could contribute to negative momentum.
AI chips and semiconductor companies have reduced their advanced microdevice (AMD) and Marvell Technology (MRVL) microdevice (MRVL) by nearly 7% this week.
“Altman's comments surprised some people when they talked about the AI bubble,” Dan Ives, head of global technology research at Wedbush Securities, told CNN.
“Because tech stocks are on a massive run, I think it's typical for investors to start taking some tips from the tables that go into Labor Day,” Ives said. “But I believe it will be short-lived.”
Each of the seven epic tech stocks from Apple (AAPL), Alphabet (GOOGL), Amazon (AMZN), Meta (Meta), Microsoft (MSFT), NVIDIA (NVDA) and Tesla (TSLA) fell both Tuesday and Wednesday, dragging the wider market.
As of Tuesday, it accounted for 33.5% of the S&P 500's total market value, reflecting a significant impact on the index's performance, according to the S&P Dow Jones index.
“The stocks are absolutely in tears. The valuation has sprinted,” said Ross Mayfield, a Baird investment strategist. “The basics are good, but they don't handle price action.”
“Along the way, I think we'll see a pocket of profits, even if it doesn't generally mark the end of a bull market,” Mayfield said.
Around 70% of S&P 500 shares closed high on Tuesday while Tech was on the market, UBS's Hoffmann-Buchardi said. The sectors that included outperform included consumer staples, utilities and real estate.
This is an indication that investors are shifting from big technology and AI-related trading and towards more defensive stocks as they reassess the market. As of Monday, Nvidia had skyrocketed 93% from its low point in early April.
“We were expecting this type of pullback,” said Jay Hatfield, CEO of Infrastructure Capital Advisor.
It is also the beginning of a historically weak season of stock, Hatfield said. “We're neutral in the market right now, but we're still really bullish at the end of the year.”
Palantir has also increased by 106% this year. However, Palantir's shares lasted for six days, falling 9.8% on Wednesday before resolving losses reflecting the volatility of AI stocks.
“We're now getting downward momentum,” Hatfield said. “Palantir is like a poster child for overvaluation, and those investors are learning that momentum works in both directions.”
