AI, Tech Stocks Face Major Losses This Week Following Nvidia Earnings

Even Nvidia CEO Jensen Huang’s optimistic pronouncements couldn’t fully insulate the tech and artificial intelligence sectors from a downturn this week.

Huang, the charismatic leader of the chip giant, had heralded “off the charts” chip sales and downplayed concerns about an “AI bubble” during the company’s earnings call. For a brief period, his bullish outlook provided a boost across the market.

“There’s been a lot of talk about an AI bubble,” Huang stated during the earnings call. “From our vantage point, we see something very different.” He emphasized the long-term potential driven by real-world demand and increasing adoption of AI across various industries.

However, the initial euphoria quickly dissipated, leading to a sell-off that impacted many AI-related stocks across the board.

Of the Magnificent 7, only Alphabet managed to buck the trend and tracked toward a winning week, while Nvidia, Amazon, and Microsoft faced the steepest declines.

Amazon and Microsoft led the downward pressure, each falling approximately 6% this week. Alphabet, on the other hand, gained nearly 8%, positioning itself as the sole megacap within the group on track for November gains, largely fueled by the unveiling of Gemini 3.

Oracle, a significant Nvidia customer, experienced a slump of around 10%. Nvidia’s client base also encompasses major model developers like OpenAI and Anthropic.

The decline extended to chip stocks more broadly, mirroring the broader tech market turbulence. Advanced Micro Devices and Micron were on pace for substantial losses of 17%. Marvell Technology also saw a decline of approximately 10%. Meanwhile, quantum computing stocks such as Rigetti, IonQ, and D-Wave each experienced drops of at least 10%.

CoreWeave, a company that purchases and leases Nvidia’s chips in data centers, initially experienced a surge following the chipmaker’s earnings report but quickly reversed course, projecting an 8% loss for the week.

The AI fervor had been cooling in the lead-up to Nvidia’s earnings report, with investors seeking reassurance that the perceived AI bubble wasn’t built on shaky foundations. Since the introduction of ChatGPT in late 2022, the stock has played a crucial role in propelling the market to new all-time highs.

However, growing concerns have emerged in recent weeks as tech stocks reached stretched valuations.

Prominent investors, including Ray Dalio of Bridgewater, expressed concerns about a potential bubble in the market in a recent interview with CNBC.

These anxieties largely stem from a surge in capital expenditures aimed at supporting AI initiatives, with tangible returns remaining elusive for many participants.

Investor Michael Burry recently raised eyebrows by accusing some of the largest cloud and infrastructure providers of potentially understating depreciation expenses and overestimating the lifespan of their chips, labeling it as a potentially deceptive practice.

Earlier in the month, Burry disclosed short positions against Nvidia and Palantir.

Shares of Palantir, a software analytics company providing AI tools to both government and corporate clients, declined by 11% this week, diminishing nearly a quarter of its value this month. This performance may reflect investor scrutiny of the company’s ambitious growth projections in the context of the broader market recalibration of AI valuations.

The market’s recent oscillation underscores a critical juncture for AI investments. While Nvidia’s dominance in the AI chip market remains unchallenged, the sustainability of current growth rates across the entire AI ecosystem is increasingly under the microscope. Investors are now demanding clearer pathways to profitability and demonstrable returns on the massive capital investments poured into the technology.