New York
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\n Tech stocks took a bruising this week as nerves persist about expensive valuations and a potential artificial intelligence bubble.\n <\/p>\n
\n The Nasdaq Composite closed lower by 0.21% on Friday. The tech-heavy index fell 3.04% across the week and suffered its worst week since early April, when President Donald Trump\u2019s announcement of so-called reciprocal tariffs rocked markets.\n <\/p>\n
\n The benchmark S&P 500 gained 0.13% on Friday after falling as much as 1.3% during earlier trading. The blue-chip Dow closed higher by 75 points, or 0.16%, after sliding more than 400 points earlier. The Nasdaq fell as much as 2.1% earlier before recouping losses.\n <\/p>\n
\n Stocks bounced off their lowest levels of the day on Friday as investors bought the dip and embraced hopes that the US government shutdown<\/a> \u2014 which became the longest in history this week \u2014 might come to an end soon.\n <\/p>\n \n After a monthslong rally, skepticism is mounting about whether high-flying tech stocks will continue to produce superior returns.\n <\/p>\n \n Wall Street\u2019s fear gauge, the CBOE Volatility Index, finished the day relatively flat but had jumped as much as 16% earlier as a tech sell-off weighed on sentiment. CNN\u2019s Fear and Greed index<\/a> hovered in \u201cextreme fear\u201d and briefly hit its lowest level since April.\n <\/p>\n \n Stocks came under pressure this week as the CEOs of Goldman Sachs and Morgan Stanley voiced concerns about elevated valuations, while Wall Street\u2019s bar for positive surprises on earnings results continues to rise after a monster rally in stocks in recent months.\n <\/p>\n \n \u201cThere are some concerns percolating under the surface with AI valuations,\u201d said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute.\n <\/p>\n \n AI and tech stocks have driven the market\u2019s bull run in recent years. As stocks rally, they can become relatively more expensive, creating an additional layer of consideration for investors. Meanwhile, there is increasing skepticism about whether the enormous amounts of money being spent on AI will be justified.\n <\/p>\n \n Nvidia shares (NVDA<\/a>) and Palantir shares (PLTR<\/a>) \u2014 two stars of the AI trade \u2014 fell roughly 7.1% and 11.2% on the week, respectively, and each had their worst week since April.\n <\/p>\n \n Oracle shares (ORCL<\/a>), which soared 36% in one day in September after the company announced a deal with OpenAI, have nearly erased all of their gains since then. It\u2019s emblematic of the renewed uncertainty about the AI wave.\n <\/p>\n \n Oracle shares slid 8.89% this week and had their worst week this year.\n <\/p>\n \n \u201cSentiment and positioning have certainly become stretched, leaving the Mag Seven [tech companies] and broader tech complex vulnerable to profit taking,\u201d Garrett Melson, portfolio strategist at Natixis Investment Managers Solutions, said in an email.\n <\/p>\n \n \u201cWhile there are some early yellow flags worth monitoring around circular and debt financing, much of the concern appears to be somewhat overdone in our view,\u201d Melson said.\n <\/p>\n \n Also contributing to jitters this week: OpenAI, the center of the AI boom, found itself in some hot water after top executives backtracked from earlier comments<\/a> that suggested government help might be needed to pay for the roughly $1.4 trillion in chips and infrastructure it has announced.\n <\/p>\n \n \u201cNearly every major technology company in the US equity market has celebrated their entanglement with a company that lacks the resources to meet its obligations,\u201d Mike O\u2019Rourke, chief market strategist at JonesTrading, said in a note. \u201cThese companies have each invited a much greater degree of uncertainty into their financial forecasts.\u201d\n <\/p>\n \n The S&P 500 on Friday briefly dipped below its 50-day moving average, a key threshold. The index finished the week down roughly 1.63% and snapped a three-week winning streak.\n <\/p>\n \n While concerns about tech are weighing on the market, the prolonged US government shutdown is also lingering in the background.\n <\/p>\n \n \u201cThe government shutdown creates further risk because the longer it continues, the more its impact will be felt on Main Street,\u201d David Russell, global head of market strategy at TradeStation, said in a note.\n <\/p>\n