AI hype seems to be cooling as tech stocks dramatically plunge

Tech stocks plunged on Friday as investors grew concerned that the artificial intelligence rally may be unsustainable, with the S&P 500 and Nasdaq falling sharply. The decline was driven by worries over AI spending and competition from Chinese AI startup Moonshot, which unveiled a large open-weight model. Chip stocks led the losses, with Nvidia down 1.4% and the Philadelphia SE Semiconductor index falling 1.8%.

AI hype seems to be cooling as tech stocks dramatically plunge Investors seem to be worrying that artificial intelligence rally might not last - Bookmark - CommentsGo to comments Tech stocks have plunged amid increasing concern that the AI /topic/ai bubble could be bursting. The US S&P 500 and Nasdaq fell dramatically in the morning, apparently because of concern that the investment in artificial intelligence /topic/artificial-intelligence could fail to deliver. It came amid news of a new, powerful AI model from China that led to suggestions the US’s control over the technology /topic/technology could be threatened. After a blistering run that lifted main stock indexes to record highs, investors have started to retreat from crowded semiconductor trades over worries about the scale of AI-related spending. Chip stocks, broadly, extended the previous session's weakness, with heavyweight Nvidia down 1.4%. This decline combined with an early gain in Apple, pushed the iPhone maker ahead of Nvidia to briefly become the world's most valuable company. The Philadelphia SE Semiconductor index fell 1.8% and was set for its worst week since March. The gauge has shed more than 20% from its late June record high. "It does feel very much a chip stock-driven move, just sort of hurting sentiment more broadly." Fiona Cincotta, senior markets analyst at City Index, said. Chinese AI startup Moonshot unveiled Kimi K3, a 2.8 trillion-parameter model it said was the world's largest open-weight AI, adding to investors’ concerns over whether hefty spending by heavyweights will deliver tangible results. "The latest development is the competition from open source models in China, which raised some competitive fears," Angelo Kourkafas, senior global investment strategist at Edward Jones Investments said. "Supposedly, there are some offerings that are rivaling the performance of Anthropic and OpenAI... potentially that is contributing today to some of that weakness that started in Asia." All three main indexes were poised for weekly losses, as an upbeat start to second-quarter earnings and benign inflation data were overshadowed by concerns over the chip sector. Netflix forecast third-quarter results below Wall Street estimates, sending shares of the streaming giant down 9 per cent. The losses weighed heavily on the communication services sector , which fell 2.4 per cent. The CBOE Volatility Index, Wall Street's fear gauge, rose 1.30 points to 18.03 — the highest in more than a week. At 10.10 am local eastern time, the Dow Jones Industrial Average rose 4.56 points, or 0.01 per cent, to 52,557.53, the S&P 500 lost 43.71 points, or 0.58 per cent, to 7,490.05 and the Nasdaq Composite lost 323.79 points, or 1.25 per cent, to 25,558.15. The tech-heavy Nasdaq hit a three-week low earlier in the session, before cutting some losses. Risks from the Middle East conflict continued to loom large as the United States struck bridges and an airport in Iran and Tehran responded by hitting a power and desalination plant in Kuwait. US consumer sentiment, however, increased to a five-month high in July, but that is likely temporary as the renewed US-Iran tensions raises gasoline prices. Among other movers, Intuitive Surgical shares slid nearly 11.4 per cent after the medical device maker kept its da Vinci procedure-growth forecast unchanged and warned insurance-plan changes may be delaying patient care. Declining issues outnumbered advancers by a 1.24-to-1 ratio on the NYSE and by a 1.55-to-1 ratio on the Nasdaq. Additional reporting by agencies Join our commenting forum Join thought-provoking conversations, follow other Independent readers and see their replies Comments comments-area