The Magnificent Seven group of America\u2019s biggest technology stocks suffered their worst week since President Trump\u2019s tariffs announcement in April as investors questioned the trajectory of the artificial intelligence boom.<\/p>\n
Almost $1 trillion in combined market value was wiped off seven of America\u2019s big tech companies: Nvidia, Meta Platforms, Microsoft, Amazon, Tesla, Alphabet and Apple.<\/p>\n
The S&P 500 had its worst week since early October despite a late afternoon bounce on Friday while the Nasdaq posted its worst weekly performances since the start of April. The CBOE volatility index, known as Wall Street\u2019s fear gauge, hit its highest level in three weeks.<\/p>\n
Over the five days, the S&P 500 was down 1.6 per cent while the Nasdaq fell 3 per cent and the Dow Jones industrial average lost 1.2 per cent.<\/p>\n
Sign up for The Times\u2019s weekly US newsletter<\/a><\/p>\n Optimism about AI<\/a> has pushed markets to record highs this year. However, concerns have emerged over the increasing use of debt to finance huge investments in AI infrastructure and the sky-high valuations of technology companies.<\/p>\n John Higgins, chief markets economist at Capital Economics, said: \u201cThe principal concern I think that people have at this point is really about the earnings side of things.<\/p>\n \u201cWe\u2019ve seen a really strong upgrading of expectations for earnings within the big tech sector and clearly some of the firms at the epicentre of all of that have been delivering very strong earnings and revenues.<\/p>\n \u201cBut I think there is a concern about how sustainable is all of this going forward, how is the rollout of AI and the huge capital spending that some of these companies have already undertaken and will continue to have to undertake as we move forward, how are we going to pay for all of this and really, is it sustainable?\u201d<\/p>\n A sell-off in AI-related stocks began at the start of the week after the chief executives of Morgan Stanley and Goldman Sachs warned of the risk of a pullback in equity markets.<\/p>\n \u201cWe should welcome the possibility that there would be drawdowns, 10 per cent to 15 per cent, that are not driven by some sort of macro cliff effect,\u201d Ted Pick, chief executive of Morgan Stanley, said at the Global Financial Leaders\u2019 Investment Summit in Hong Kong.<\/p>\n David Solomon, chief executive of Goldman Sachs, told the summit: \u201cWhen you have these cycles, things can run for a period of time. But there are things that will change sentiment and will create drawdowns, or change the perspective on the growth trajectory, and none of us are smart enough to see them until they actually occur.\u201d<\/p>\n Investors were also troubled by regulatory filings showing that Michael Burry, 54, the hedge fund manager portrayed by Christian Bale in the film The Big Short, had made a $1.1 billion bet on share price declines<\/a> in Nvidia, the AI chipmaker, and Palantir Technologies<\/a>, which builds data-analytics software powered by AI.<\/p>\n There are broader concerns about the US economy as the preliminary reading of the University of Michigan\u2019s consumer sentiment index was the lowest since June 2022, at 50.3 this month.<\/p>\n \u2022 Boom or bust, AI remains an American phenomenon<\/a><\/p>\n