Market professionals are expressing worries about the artificial intelligence trade following a week of disappointing data from the technology sector. The S&P 500 remains close to record highs, supported by a rotation into non-AI stocks like Procter & Gamble and Berkshire Hathaway, but AI-related shares are facing significant declines.
The Global X Artificial Intelligence & Technology ETF dropped 4% this week, marking an 8% loss for October and a 15% decline from its summer peak, nearing bear market territory. The iShares Semiconductor ETF is also down 29% from its recent high.
Concerns were heightened by Anthropic's public filing, which revealed a slowdown in sales growth, and reports from major tech companies indicating a pullback in capital expenditures. Analysts, including JJ Kinahan from Cboe Global Markets, suggest that the recent AI boom is under scrutiny as profits need to materialize to justify the extensive investments made.
Major tech stocks like Intel, Micron, and Nvidia have seen significant drops, with Google experiencing its worst trading day after reporting a decline in core advertising revenues. Despite the current pessimism, some investors are still optimistic about the long-term prospects of AI technology, particularly with successful consumer applications like Meta's Muse.
However, the overall sentiment remains cautious, with many investors seeking downside protection in the options market, indicating a shift in risk appetite. The broader market is seeing a rotation away from tech, with consumer staples like Coca-Cola and Walmart gaining traction