Tech stocks slide as investors question AI spending

TL;DR:

  • The Nasdaq closed 2.2% lower on Tuesday as a tech sell-off spread from chipmakers to AI-exposed shares.
  • Seven tech companies now make up 30% of the S&P 500’s value, concentrating risk in a single theme.
  • London’s FTSE 100 held steady, shielded by its relative lack of big tech listings.

A wave of selling in technology shares rattled global markets on Tuesday, as investors shifted their attention from geopolitics to a harder question: whether the money pouring into artificial intelligence is justified by returns. The tech-heavy Nasdaq closed 2.2% lower and the S&P 500 fell 1.43%, denting indices that had ridden the AI boom to record highs.

Concentration and cost

The unease is structural. Seven companies account for nearly a third of the S&P 500, so a stumble in AI sentiment drags the whole index down. The slide began when Alphabet had its worst day in over a year after two high-profile AI researchers departed, and deepened as Asian chipmakers SK Hynix and Samsung Electronics each closed more than 12% lower. SpaceX, freshly listed on 12 June, dropped 16% on Monday after announcing a $20bn bond sale — a reminder that much AI infrastructure is now debt-financed. Morgan Stanley estimates AI-related borrowing will pass $500bn this year.

The BBC’s coverage captured the split among analysts. Bank of America’s Vivek Arya framed the drop as profit-taking after a historic run, arguing the industry is simply moving from defending its initial returns to solving power and infrastructure constraints. Sceptics counter that cooling corporate IT budgets and the prospect of higher interest rates mean the era of easy gains is over. Some economists have likened the surge in AI spending to the dot-com bubble that burst in the early 2000s.

Looking forward

For UK readers, the most telling detail is what did not happen: the FTSE 100 closed steady. As AJ Bell’s Danni Hewson noted, the index’s thin roster of technology stocks insulated it from Wall Street’s slide — a structural quirk that has long frustrated London but offered shelter this week. The deeper test comes with the next round of corporate earnings, when AI’s biggest spenders must show the investment is producing profit rather than marketing buzz. For UK firms weighing their own AI budgets, the market’s nervousness is a useful prompt to tie spending to measurable outcomes rather than momentum.

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