A sudden wave of profit-taking in artificial intelligence shares this week has wiped out trillions in market value worldwide, reigniting debate over whether the sector’s meteoric rise has created the next great tech bubble.
The rout began Tuesday on Wall Street and quickly spread. The S&P 500 shed 1.1%, the Nasdaq Composite tumbled 2%, and the Russell 2000 dropped 1.8%.
Nvidia fell nearly 4%, while Palantir plunged 8% despite beating earnings. Disappointing results from AMD and Super Micro Computer poured fuel on the fire.
Asia bore the brunt on Wednesday. South Korea’s Kospi cratered more than 6%, Japan’s Nikkei 225 lost 4.5%, and Taiwan’s benchmark slid 2.5%. Samsung Electronics and SK Hynix each shed over 5%, while SoftBank Group erased nearly $50 billion in market cap after a 10% single-day drop.
Europe followed suit, with the STOXX 600 down 0.7% and Germany’s DAX off similar ground. U.S. futures pointed to another weak open, with S&P 500 contracts signaling a 0.5% decline.
Goldman Sachs CEO David Solomon had foreshadowed trouble, telling investors a 10-20% drawdown was “likely” within two years. Bank of England Governor Andrew Bailey told CNBC the productivity promise of AI could be undermined by uncertain earnings, adding, “We have to be very alert to these risks.” The IMF and Bank of England both flagged rising debt in data-center builds.
Not everyone is panicking. UBS strategist Kiran Ganesh noted earnings have beaten expectations, calling the dip “reasonable volatility.” Skanska CEO Anders Danielsson told CNBC his firm sees “no slowdown” in data-center projects across the U.S., Europe, and Nordics. GDS Wealth Management’s Glen Smith views the pullback as a buying opportunity for investors who missed the rally.
Others recommend diversification. Pictet Asset Management’s Luca Paolini prefers emerging markets—India, Brazil, and broader EM—for AI exposure without U.S. concentration risk.
Despite the carnage, major indexes remain solidly higher year-to-date: S&P 500 up 15%, Nasdaq over 20%. Yet this week’s synchronized selloff—amid $420 billion in planned hyperscaler spending—serves as the clearest warning yet that the AI boom can falter. If skepticism spreads, the global equity rally could face its toughest test since the pandemic recovery began.
