Wall Street's AI dream fades as tech stocks plummet
What's the story
The confidence of investors in artificial intelligence (AI) appears to be waning, with a massive sell-off of tech stocks on Wall Street. Over the past week, some of Silicon Valley's biggest players heavily invested in generative AI have seen their stock values drop by nearly $1 trillion. The decline includes major companies such as Oracle, Meta, Palantir Technologies, and NVIDIA.
Market impact
Microsoft's stock slump
Microsoft, one of Silicon Valley's most influential companies, has also witnessed a major stock slump. Bloomberg reported an 8.6% decline over eight days, wiping out nearly $350 billion from its market valuation. This is the company's worst losing streak since 2011 when its shares fell for nine consecutive days. The downturn comes despite better-than-expected growth in Microsoft's Azure cloud computing business during the same period.
Financial scrutiny
Financial scrutiny of tech stocks
The financial scrutiny of tech stocks comes amid growing concerns over the high costs of running AI businesses without any tangible returns. Microsoft, for instance, had significant expenditures in its last quarter, including investments in AI infrastructure. Despite positive growth indicators, Wall Street is becoming skeptical about these massive investments into building out this new technology.
Economic impact
Broader economic factors at play
The downturn in tech stocks isn't just about the AI hype. Broader economic factors such as the ongoing US government shutdown, falling consumer sentiment, and mass layoffs are also weighing on the stock market. A recent report from Challenger, Gray & Christmas revealed that job losses last month were the worst for October since 2003, with Amazon alone cutting some 14,000 jobs.