Tech Stocks Slide as AI Reality Lags Behind Hype

Will AI bring actual value to the world beyond Ghibli-fying selfies and the admittedly priceless ability to brainstorm bizarre recipes like a PB&J-and-Sriracha hot dog? Inquiring investors want to know.

Tech stocks continued to tank on Wednesday, with the Nasdaq slipping for the second straight day. AI software company Palantir plummeted about 20% from recent highs, while chipmakers like Micron and Intel and a wide array of other tech stocks dipped by single digits.

Part of the pullback comes from investors spooked by an MIT report that checked in on the $30 billion to $40 billion that companies have spent on generative AI. It found that just 5% of AI pilot programs resulted in “rapid revenue acceleration,” while the vast majority of projects have had less impact. 

The report spread fast on the heels of OpenAI CEO Sam Altman telling The Verge that the current AI market is a “bubble” full of “overexcited investors.”

AI’s Big Productivity Promise

AI is supposed to boost worker productivity, and thereby corporate profits, by automating tasks like answering customer service calls and replying to emails — ultimately replacing millions of human workers. Morgan Stanley expects AI to create between $13 trillion and $16 trillion in value for the S&P 500, while Anthropic’s CEO predicts AI could replace half of white-collar jobs. 

But others are feeling a little more cautious about the scale and immediacy of AI’s impact: 

• So far, AI hasn’t had a noticeable impact on unemployment data, even in the most exposed sectors, economist Natasha Sarin said. Surveys about whether AI has supplemented careers like coding to make workers more productive have yielded mixed results.  
• MIT economist Daron Acemoglu said he expects AI to expand the US economy by about 1% over the next decade, or a tenth of a percent annually — not nothing, but not revolutionary.

We’re Only Human: Investors are bound to feel a little vertigo looking off the edge of AI. Hype around AI has pushed tech stocks to new records, with the Nasdaq hitting 20 highs this year. This isn’t the first time AI stocks have wobbled. Chinese startup DeepSeek’s claims that its AI model outperformed rival tech while costing less to build became an inflection point that made investors start counting the zeros on AI funding announcements. Investors are also generally feeling cautious right now ahead of Federal Reserve Chair Jerome Powell’s speech this Friday, which they’ll pick apart for rate-cut hints like T. Swift fans ahead of an album release.