AI Stock Bubble Burst Wipes Out $1.8 Trillion from S&P 500
Recent trends in the stock market have highlighted a significant downturn for AI-related stocks. Since October 29, shares of U.S.-listed companies in the Global X Artificial Intelligence & Technology ETF have collectively lost $1.8 trillion in market value. This figure surpasses the market capitalization of industry giant Meta Platforms, which stands at $1.5 trillion.
Key Events and Data
The decline in AI stocks intensified following Nvidia’s peak closing stock price on October 29. This date is notable as it marked a high point for Nvidia, a leader in the AI sector.
Currently, over 70% of AI stocks in this group have decreased in value. On average, stocks within this category have dropped by 11.6%, indicating they are in correction territory.
Market Sentiment and Analysis
Market analysts, including Phil Blancato of Ladenburg Thalmann Asset Management, have observed that investor sentiment towards AI has turned into a significant headwind for overall market performance. The market recently benefited from impressive gains in the S&P 500, but the current trend among AI stocks has raised concerns.
Performance of Major AI Stocks
Nvidia is experiencing one of the most substantial declines, with its stock down nearly 10% from its peak. This loss translates to a staggering $493 billion in market value, which is significant compared to individual valuations of 97% of S&P 500 members.
Other major players are also feeling the pinch:
- Meta Platforms: Down 19% since October 29, resulting in a $362 billion loss in market value.
- CoreWeave: The largest percentage loss at 44%.
- Oracle: Shares off 21%, erasing $166 billion in value.
- Microsoft: Stock down 7.1%, resulting in a $285 billion loss.
- Broadcom: A decline of 12.1%, equating to a $221 billion reduction in market value.
- Palantir Technologies: Down by 13.4%, resulting in a $63 billion loss.
- Alibaba Group: Down 11%, wiping out $44 billion.
- Shopify: Down 18.4%, limiting its value by $42.9 billion.
Market Outlook
While Nvidia maintains a solid Relative Strength Rating of 85 and an impressive Earnings Per Share (EPS) Rating of 99, the forecast for this sector remains cautious. Analysts predict a substantial 130% rise in EPS for Nvidia this year. However, the overall sentiment in the AI sector may remain critical, as the path to recovery appears uncertain.
As the AI stock bubble experiences significant pressure, investors will need to navigate these turbulent waters with care, assessing each company’s potential for recovery amidst substantial losses.
