U.S. technology stocks fell sharply as investors grew more concerned that soaring spending on artificial intelligence will be unsustainable. The Nasdaq Composite dropped 2.1%, while the S&P 500 declined 1.4%, dragged down by major semiconductor and software firms. Nvidia, Microsoft, and Alphabet each lost more than 2% in afternoon trading. Analysts warned that capital expenditure on AI infrastructure could outpace revenue growth, especially as cloud providers report slowing demand for compute capacity.
The pullback follows a record-breaking rally in AI-related equities over the past 18 months. Investors are now scrutinizing earnings reports for signs that AI investments are translating into profitability. Wall Street Journal markets coverage notes that volatility may persist as the sector recalibrates expectations. The broader market also reacted to mixed economic data, with jobless claims rising slightly last week.
Traders are watching upcoming Federal Reserve commentary for clues on interest rate policy. Despite the downturn, some strategists maintain that long-term AI adoption remains a structural tailwind, though near-term valuations appear stretched.
Source: Wall Street Journal Markets · Summarized by HeadlinesBriefing