US Stock Market Sees Their Worst Day Since 2022: AI & Tech Stocks Bleed
US Stock Market Sees Their Worst Day Since 2022: AI & Tech Stocks Bleed
US Stock Market Sees Their Worst Day Since 2022: AI & Tech Stocks Bleed
Jul 25, 2024
Table of Contents
📉 Wall Street's Massive Sell-Off
The US stock market witnessed a significant downturn recently, with a mass sell-off on Wednesday leading to investors losing as much as one trillion dollars in a single day. This dramatic decline has raised concerns among investors and market analysts.
So, what caused this drastic fall? The answer lies in the burgeoning field of artificial intelligence (AI). Once seen as the future of tech, AI is now being viewed with skepticism, which has resulted in substantial losses for major tech companies.
Companies like Nvidia, Broadcom, and Super Micro Computer, which were riding high on the AI wave, experienced significant drops in their stock prices. Nvidia, the biggest seller of AI chips, saw a decline of over six percent. Broadcom was down by more than seven percent, and Super Micro Computer dropped by more than nine percent.
🔍 Tech Giants and Their AI Investments
The tech giants who made big bets on AI also faced substantial losses. Apple, Microsoft, Meta, and Alphabet all saw their stock prices fall. Apple dropped by almost three percent, Microsoft by more than three percent, Meta, the parent company of Facebook, lost 5.6 percent, and Alphabet, which owns Google, fell by five percent.
Despite some recovery, the Nasdaq opened in the red again, down by over two hundred points. This decline is notable because there was massive demand for these stocks until recently. AI had triggered a rally in the tech sector, with big tech companies promoting AI as the next big thing and the future of technology.
Google CEO Sundar Pichai compared AI breakthroughs to inventions like fire and electricity. Microsoft CEO Satya Nadella mentioned that we are entering a golden age and that AI would be beneficial for humanity. Apple CEO Tim Cook and Meta's Mark Zuckerberg also expressed bullish sentiments about artificial intelligence.
💸 The Financial Toll of AI Investments
Despite the initial enthusiasm, investors are now pulling out, feeling that the hype around AI is overblown. Tech companies have been spending billions of dollars on AI, buying chips and data centers, and consuming massive amounts of power to get their AI services up and running. This has resulted in soaring expenses.
Microsoft, for instance, spent fourteen billion dollars in one quarter on capital expenditure driven by AI. Capital expenditure, or CapEx, refers to the money spent on buying physical assets like chips and servers to develop AI tools.
Other tech giants are also spending heavily on AI. Alphabet's CapEx stood at twelve billion dollars for a single quarter. Meta spent seven billion dollars and is projected to spend up to forty billion dollars in the entire year on AI-related capital expenditure. Amazon also spent fourteen billion dollars, matching Microsoft's expenditure.
📊 The Question of ROI
With such significant investments, the pressing question for investors is: What is the return on investment (ROI)? Are tech giants making any money from their AI investments? So far, the answer appears to be almost nothing.
According to Barclays, big tech companies are expected to spend around sixty billion dollars every year on developing AI models until 2026. However, the return on this investment is becoming less attractive.
Take the case of OpenAI, the makers of ChatGPT, one of the most popular AI products. Despite having more than a hundred million active users, OpenAI is bleeding cash and could lose as much as five billion dollars this year. The company could run out of money in just twelve months.
📉 The AI Bubble
These developments have led to the belief that there is an AI bubble. While the technology is revolutionary, we are still far from unlocking its true potential. It will take time and a lot of investment to get there.
Jim Covelo, the head of global equity research at Goldman Sachs, pointed out that AI bulls seem to trust that use cases will proliferate as the technology evolves. However, eighteen months after the introduction of generative AI, not one truly transformative, let alone cost-effective, application has been found.
Sequoia, a venture capital company that made early bets on companies like Apple, YouTube, and Instagram, also weighed in on the AI debate. Outside of ChatGPT, how many AI products are consumers really using today? They compared the value consumers get from services like Netflix and Spotify to the value they receive from AI products.
❓ FAQ
What caused the recent decline in the US stock market?
The recent decline was triggered by a mass sell-off, primarily due to skepticism surrounding artificial intelligence (AI) investments.
Which tech companies were most affected by the sell-off?
Companies like Nvidia, Broadcom, Super Micro Computer, Apple, Microsoft, Meta, and Alphabet saw significant drops in their stock prices.
How much have tech companies invested in AI?
Tech companies have poured billions into AI investments. For instance, Microsoft spent fourteen billion dollars in a single quarter on AI-related capital expenditure.
Are tech companies making money from AI investments?
So far, the ROI on AI investments has been minimal. Companies like OpenAI are still struggling to turn a profit.
Is there an AI bubble?
Many analysts believe there is an AI bubble. While the technology is promising, its true potential is yet to be unlocked, and current investments are not yielding significant returns.
Table of Contents
📉 Wall Street's Massive Sell-Off
The US stock market witnessed a significant downturn recently, with a mass sell-off on Wednesday leading to investors losing as much as one trillion dollars in a single day. This dramatic decline has raised concerns among investors and market analysts.
So, what caused this drastic fall? The answer lies in the burgeoning field of artificial intelligence (AI). Once seen as the future of tech, AI is now being viewed with skepticism, which has resulted in substantial losses for major tech companies.
Companies like Nvidia, Broadcom, and Super Micro Computer, which were riding high on the AI wave, experienced significant drops in their stock prices. Nvidia, the biggest seller of AI chips, saw a decline of over six percent. Broadcom was down by more than seven percent, and Super Micro Computer dropped by more than nine percent.
🔍 Tech Giants and Their AI Investments
The tech giants who made big bets on AI also faced substantial losses. Apple, Microsoft, Meta, and Alphabet all saw their stock prices fall. Apple dropped by almost three percent, Microsoft by more than three percent, Meta, the parent company of Facebook, lost 5.6 percent, and Alphabet, which owns Google, fell by five percent.
Despite some recovery, the Nasdaq opened in the red again, down by over two hundred points. This decline is notable because there was massive demand for these stocks until recently. AI had triggered a rally in the tech sector, with big tech companies promoting AI as the next big thing and the future of technology.
Google CEO Sundar Pichai compared AI breakthroughs to inventions like fire and electricity. Microsoft CEO Satya Nadella mentioned that we are entering a golden age and that AI would be beneficial for humanity. Apple CEO Tim Cook and Meta's Mark Zuckerberg also expressed bullish sentiments about artificial intelligence.
💸 The Financial Toll of AI Investments
Despite the initial enthusiasm, investors are now pulling out, feeling that the hype around AI is overblown. Tech companies have been spending billions of dollars on AI, buying chips and data centers, and consuming massive amounts of power to get their AI services up and running. This has resulted in soaring expenses.
Microsoft, for instance, spent fourteen billion dollars in one quarter on capital expenditure driven by AI. Capital expenditure, or CapEx, refers to the money spent on buying physical assets like chips and servers to develop AI tools.
Other tech giants are also spending heavily on AI. Alphabet's CapEx stood at twelve billion dollars for a single quarter. Meta spent seven billion dollars and is projected to spend up to forty billion dollars in the entire year on AI-related capital expenditure. Amazon also spent fourteen billion dollars, matching Microsoft's expenditure.
📊 The Question of ROI
With such significant investments, the pressing question for investors is: What is the return on investment (ROI)? Are tech giants making any money from their AI investments? So far, the answer appears to be almost nothing.
According to Barclays, big tech companies are expected to spend around sixty billion dollars every year on developing AI models until 2026. However, the return on this investment is becoming less attractive.
Take the case of OpenAI, the makers of ChatGPT, one of the most popular AI products. Despite having more than a hundred million active users, OpenAI is bleeding cash and could lose as much as five billion dollars this year. The company could run out of money in just twelve months.
📉 The AI Bubble
These developments have led to the belief that there is an AI bubble. While the technology is revolutionary, we are still far from unlocking its true potential. It will take time and a lot of investment to get there.
Jim Covelo, the head of global equity research at Goldman Sachs, pointed out that AI bulls seem to trust that use cases will proliferate as the technology evolves. However, eighteen months after the introduction of generative AI, not one truly transformative, let alone cost-effective, application has been found.
Sequoia, a venture capital company that made early bets on companies like Apple, YouTube, and Instagram, also weighed in on the AI debate. Outside of ChatGPT, how many AI products are consumers really using today? They compared the value consumers get from services like Netflix and Spotify to the value they receive from AI products.
❓ FAQ
What caused the recent decline in the US stock market?
The recent decline was triggered by a mass sell-off, primarily due to skepticism surrounding artificial intelligence (AI) investments.
Which tech companies were most affected by the sell-off?
Companies like Nvidia, Broadcom, Super Micro Computer, Apple, Microsoft, Meta, and Alphabet saw significant drops in their stock prices.
How much have tech companies invested in AI?
Tech companies have poured billions into AI investments. For instance, Microsoft spent fourteen billion dollars in a single quarter on AI-related capital expenditure.
Are tech companies making money from AI investments?
So far, the ROI on AI investments has been minimal. Companies like OpenAI are still struggling to turn a profit.
Is there an AI bubble?
Many analysts believe there is an AI bubble. While the technology is promising, its true potential is yet to be unlocked, and current investments are not yielding significant returns.