US tech stocks lose $1 trillion on AI bubble fears

 The US stock market has lost $1 trillion in just four days as a sell-off of tech companies deepened on Wednesday.

The S&P 500 fell for the fourth consecutive day amid fears that an AI-powered stock market rally could be about to collapse. It dropped by as much as 1.1pc, later recovering to a drop of 0.2pc.

The tech-heavy Nasdaq sank by as much as 1.8pc in early trading on Wednesday, bringing the index down by as much 7pc so far this week in its worst sell-off since April. It later pared back losses to end the day down 0.7pc.

The drop-off has been fuelled by concerns that AI companies are overvalued, with some claiming they have little to show for the billions of pounds of investment that have been ploughed into companies such as OpenAI.

Shares in Nvidia, the world’s largest company with a $4 trillion valuation, fell by 3.3pc in early trading on Wednesday before recovering. The technology giant, which makes the chips that power vast AI data centres, is down 3.7pc since Monday.

Shares in Palantir, the US data business and defence contractor, also sank by as much as 6pc on Wednesday before partly recovering to a drop of 1.1pc. The value of its stock has tumbled by 11pc since Friday.

Shares in American chipmaker Intel plunged by7pc while UK chipmaker Arm’s share price was down 3pc on Wednesday.

It comes after a report from researchers at MIT suggested that 95pc of corporate AI projects are so far generating “zero return” for businesses.

Danni Hewson, head of financial analysis at AJ Bell, said: “The MIT report into the AI boom has soured sentiment.”

Sam Altman, the chief executive of ChatGPT maker OpenAI, also said last week that some investors had become “overexcited” about AI.

However, analysts cautioned against racing to sell tech stocks.

Ulrike Hoffmann-Burchardi, a chief investment officer at UBS, said in a client note: “While some near-term tech volatility is not surprising given the run-up in valuations, we advise investors against becoming overly defensive for several reasons.”

Tech earnings growth has been strong and companies are becoming better at monetising AI adoption, Ms Hoffmann-Burchardi said

07:46 PM BST

Fears over government intervention

US tech investors are also worried about Trump administration interference in the private sector.

US Commerce Secretary Howard Lutnick said on Tuesday that he is looking at taking a stake in chip firms including Intel in exchange for grants to spur factory building in the US.

Intel’s share price plunged by 8.86pc on Wednesday.

Reuters also reported on Tuesday that Mr Lutnick is planning to expand this plan to other companies.