Tech Stocks Fall for Second Day in a Row: What's Happening?
Tech companies fall again on Wall Street as investors demand proof that artificial intelligence will generate profits
After months of driving Wall Street to record levels, big tech companies are having a tough week. Stocks in the sector recorded their second consecutive day of losses, while doubts grow about whether million-dollar investments in artificial intelligence (AI) will really generate the profits that investors expect.
On Tuesday, the Nasdaq Composite index, which brings together many of the most important technology companies in the United States, fell 580 points, equivalent to 2.2%, to close at 25,587 units. The decline adds to the 1.3% decline registered during the previous day.
The pressure was reflected in several of the companies most followed by the market. Nvidia lost 4.2% and Broadcom fell 3.1%. Alphabet, parent company of Google, fell 0.8%, while Amazon managed to end the session with a gain of 0.6%. SpaceX, for its part, advanced 1%, although it is still far from the highs reached after its recent stock market debut.
Behind these falls there is an increasingly visible concern among investors: the profitability of artificial intelligence. Over the past few months, many companies have poured billions of dollars into developing this technology with the promise of boosting their future revenues and profits. However, now the market is looking for concrete results.
“Today's (Tuesday) sharp declines in technology stocks, without any major catalyst, are another sign of growing volatility in these stocks, the result of what increasingly looks like an overstatement of earnings expectations and/or valuations,” James Reilly, senior market economist at Capital Economics, told CBS News.
The concern is also reflected in consumer habits. Data from the Bank of America Institute shows that only about 3% of its customers currently pay for AI services. Although the use of these tools continues to grow, many users continue to use free versions.
Despite these conclusions at the user level, the same institute is optimistic based on the commercial trend that uses AI tools more to offer different goods and services.
“As AI becomes integrated into productivity, search, entertainment, shopping and personal assistant use cases, and higher-tier subscription plans emerge, BofA Global Research predicts the US market could reach $75 billion annually,” noted the Bank of America Institute.
Another factor that adds nervousness is the possibility that the United States Federal Reserve (Fed) will increase interest rates before the end of the year. Investors are also awaiting new data on inflation, as a rise in prices could reinforce the need for tighter monetary policy.
Despite the recent volatility, some specialists believe that the adjustment comes after several months of strong gains for technology stocks. Despite these declines, enthusiasm for artificial intelligence continues, it's just that investors want to see tangible results before continuing to boost sector valuations.