Tech Stocks Plunge Amid AI Bubble Fears and Market Rotation

Tech stocks, including Nvidia and Alphabet, fell for a second day amid concerns over the sustainability of the AI boom and a recent market rotation away from some of this year's biggest winners. Chip stocks AMD and Broadcom dropped over 2%, while Micron shares plummeted over 5%. The rotation out of AI-linked stocks comes as sentiment soured on the market for artificial intelligence, fueled by a recent report from MIT and commentary from OpenAI CEO Sam Altman.

Tech stocks, including Nvidia and Alphabet, fell for a second day amid concerns over the sustainability of the AI boom and a recent market rotation away from some of this year's biggest winners. Chip stocks AMD and Broadcom dropped over 2%, while Micron shares plummeted over 5%. The rotation out of AI-linked stocks comes as sentiment soured on the market for artificial intelligence, fueled by a recent report from MIT and commentary from OpenAI CEO Sam Altman.

The MIT report, which surveyed 300 public AI deployments, found that approximately 95% of company generative AI pilot programs resulted in "little to no measurable impact" on revenue or profits [2]. This revelation has sparked skepticism about the sector's rapid growth and the sustainability of high valuations seen in AI-focused companies. Experts caution that while the underlying technology is not going away, the current market jitters are a short-term correction during a long-term transformation.

Alphabet Inc. (NASDAQ:GOOGL), which recently pledged an additional $9 billion in Oklahoma to expand cloud and artificial intelligence infrastructure, is among the companies feeling the heat. Despite this investment, the stock has seen a decline in value, reflecting broader market sentiment [1]. The company's capital spending plans have been increased to an estimated $85 billion from $75 billion previously, indicating a significant commitment to AI and cloud infrastructure.

The broader tech sector is experiencing a market rotation, with investors becoming more selective about AI stocks. Chipmakers integral to the AI boom, such as Nvidia and AMD, have seen their shares drop, highlighting the sector's vulnerability to market volatility. However, experts argue that this correction is a normal part of the tech cycle and not a sign of a full-blown bubble. The technology's long-term potential remains strong, with AI expected to transform various industries, from healthcare to logistics.

In conclusion, the recent decline in tech stocks, particularly those tied to AI, reflects a short-term correction driven by market concerns over the sustainability of the AI boom. While the sector faces challenges, the long-term potential of AI remains strong, and investors should remain cautious but optimistic. The market is likely to separate winners from pretenders, with those companies that can demonstrate real value from AI set to emerge as leaders.

References:
[1] https://finance.yahoo.com/news/alphabet-googl-boosts-capex-9b-231941472.html
[2] https://fortune.com/2025/08/20/experts-say-markets-ai-anxiety-will-punish-those-chasing-froth/