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US tech stocks hit by wave of concerns over future of AI boom

MIT paper questioning returns from new technology punctures Wall Street’s enthusiasm


US tech stocks sold off on Tuesday as a wave of concerns that intense enthusiasm surrounding artificial intelligence could be overdone slammed into some of Wall Street’s most speculative companies.

The tech-heavy Nasdaq Composite was down 1.4 per cent by early afternoon in New York, with software group Palantir falling 9.2 per cent and chipmaker Arm Holdings shedding 4.5 per cent.

The decline left the index on track for its biggest one-day drop since August 1. The blue-chip S&P 500 was 0.7 per cent lower.

Traders pinned some of the decline on a report released late on Monday by a branch of the Massachusetts Institute of Technology in which researchers said that “95 per cent of organisations are getting zero return” from their investments in generative AI, the technology that has sent US stocks soaring to a series of record highs in recent months.

“The story is spooking people,” said one trader close to a multibillion-dollar US tech fund.

“Just 5 per cent of integrated AI pilots are extracting millions in value, while the vast majority remain stuck with no measurable [profit and loss] impact,” the MIT report said.

The stock drop also came days after OpenAI chief executive Sam Altman signalled that an AI bubble might be forming.
“Are investors over excited? My opinion is yes,” Altman told reporters this week.

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