Tech stock tumble is “watershed moment” marking end of AI hype

Big Tech stocks tumble in what could mark the end of an AI bubble.

Berkshire Hathaway’s track record of success in investment has meant their decision to sell such a significant proportion of Apple shares has caused a stir. Credit: Rawpixel.com via Shutterstock.

Big Tech stocks tumbled at the start of this week (beginning 5 August), leading to speculation about an end to the AI bubble.

While AI optimism has buoyed the market, veteran investment fund Berkshire Hathaway’s sale of half of its Apple stock position, as well as widespread market selloffs, culminated in the worst day for Wall Street in over two years.

Collectively, the magnificent seven Big Tech companies are estimated to lose $800bn in value due to the selloffs.

The stock value of Apple, Alphabet, Tesla, and Amazon all dropped 4% while Microsoft and Meta fell 3%, with NVIDIA falling 7%.

According to Emma Obanye, co-founder and CEO of non-profit OneTech which increases opportunities for diverse founders, the tech selloffs “mark a watershed moment” as “they emphasise the importance of setting realistic investor expectations, particularly in rapidly evolving sectors like AI.”

Is the AI hype over?

The stock market tumble has been attributed to concern in the investment community over colossal spending on AI infrastructure eating into Big Tech profit margins, while a US recession looms.

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A recent GlobalData tech sentiment survey corroborates investor caution in AI, finding that sentiment around AI’s potential to fulfil expectations have fallen to below 50% for the first time in over a year.

Despite this, Obanye remains firm that she believes the AI hype to be far from over, instead viewing these selloffs “as a reminder that capital investment carries inherent risk”.

She notes that these selloffs should not discourage investors from funding the tech sector.

Giving advice to the investment community, she explained “Investors should change strategy in light of this news and diversify their portfolios, focusing on start-ups as innovation incubators. Investment in diverse voices from all levels of the industry will spearhead technological developments and business growth that’s truly sustainable.”