Is Wall Street Cooling on AI? Tech Stocks Take a Hit Amid Rising Concerns

A turbulent week for the tech sector has sparked questions about whether investor enthusiasm for artificial intelligence is beginning to fade.

The Nasdaq Composite Index slid nearly 3% this week — its steepest decline since the trade tariff turbulence during Donald Trump’s presidency. Once high-flying tech giants were at the center of the slump: Palantir tumbled 11%, Oracle slipped 9%, and Nvidia shed about 7%. Even industry heavyweights like Microsoft and Meta weren’t spared, each losing roughly 4% despite reaffirming their long-term bets on AI spending in recent earnings calls.

Market analysts say the correction may be more about expectations than fundamentals. “Valuations are lofty,” explained Jack Ablin of Cresset Capital. “When optimism runs this high, even small disappointments can have an outsized impact, while good news barely registers.”

Beyond AI hype fatigue, broader economic pressures are also weighing on investor sentiment. The continuing government shutdown, weakening consumer confidence, and widespread layoffs across sectors have all added to Wall Street’s caution.

Notably, the pain wasn’t evenly distributed. The more diversified S&P 500 fell by 1.6%, and the Dow Jones Industrial Average dipped 1.2% — both faring better than the tech-heavy Nasdaq.

For now, it’s unclear whether this marks a temporary pullback or a more fundamental recalibration of expectations around AI’s profitability. But one thing is certain: the once-unshakable tech rally is showing its first real signs of stress.