The tech-heavy Nasdaq stock index has been on a roller coaster lately. This photo taken in 2000 shows a woman walking in front of the Nasdaq sign in Times Square in New York City.
Chris Hondros/Getty Images/Hulton Archive
hide caption
toggle caption
Chris Hondros/Getty Images/Hulton Archive
Stay up to date with NPR first Newsletter sent every weekday morning.
The wave of selling in tech stocks is beginning to reflect doubts about whether the boom in spending on artificial intelligence is worth it.
Nvidia and Google’s parent company Alphabet, the most famous AI-related tech stocks, fell for the second day in a row.
But among Tuesday’s biggest losers was chipmaker Micron Technology, whose stock plummeted more than 13%. The sharp decline caused the tech-heavy Nasdaq index to drop more than 2%.
Micron stock is a perfect representation of what’s happening in the stock market. The huge valuations of AI stocks are evidenced by their value soaring nearly 800% over the past year as demand for memory chips surges due to AI developments.
“The market continues to oscillate between ‘AI is going to be great, it’s going to increase productivity, and all these companies are going to win,’ and ‘AI is a huge waste of time and the return on investment is not worth it at all. This is all one big bubble,'” said Gil Luria, head of technology research at investment firm DA Davidson.
More than $1 trillion has been spent. “Will we start seeing revenue?”
Spending on AI is huge. According to Stanford University’s AI Index report, companies invested more than $580 billion in AI around the world in the past year, compared to more than $1 trillion in the previous four years.
These doubts caused turmoil in the stock market. Alphabet’s stock price fell 5% on Monday, while SpaceX’s stock fell 16%.
The tension spread to Asian markets as well. The Korean market was hit the hardest, with the shares of Samsung and rival SK Hynix each falling 12%.
This comes as two of the largest AI companies, OpenAI and Anthropic, are considering selling their shares to the market in what is shaping up to be the two largest initial public offerings in history.
Both OpenAI and Anthropic are currently profitable, but there are open questions about the long-term profitability of generative AI.
“The market is trying to digest all of this and saying, ‘Are we going to start seeing revenue?'” said Mark Vena, CEO of SmartTech Research.
Semiconductor maker stocks fell sharply on Tuesday. Intel and Advanced Micro Devices both fell about 6%.
But Micron was hit the hardest, largely due to tensions ahead of the company’s earnings, expected on Wednesday. Analysts say they are watching Micron’s performance for signs that the AI investment cycle remains on track.
