Tech Momentum Falters as AI Trade Cools

Wall Street’s summer rally showed signs of fatigue as tech and AI-linked stocks dragged major indices lower for a second straight session. 

The Nasdaq Composite slipped 0.67% on Wednesday after tumbling 1.46% the day before, putting the tech-heavy index on track to end a streak of weekly gains. The S&P 500 edged down 0.24%, extending its losses to four consecutive sessions, while the Dow hovered flat.

After months of enthusiasm that lifted the Nasdaq and S&P 500 to repeated record highs, investors are now retrenching. Palantir, which has surged 106% this year, lost another 1.1% on Wednesday following a 9.35% collapse on Tuesday, while Nvidia, still up 93% since early April, slipped 0.14% after a 3.5% slide. Other AI and chip names such as AMD and Marvell dropped nearly 7% over the week, as traders questioned whether valuations had run ahead of fundamentals.

Sentiment took a hit after OpenAI’s chief executive suggested the market may be in a bubble, echoed by an MIT study showing most firms piloting generative AI tools have yet to see returns.

What Does This Mean for Me? 

Even as Big Tech names Apple, Microsoft, Tesla and Meta fell at the same time, nearly 70% of S&P 500 stocks rose on Tuesday, with defensive sectors such as utilities and consumer staples gaining ground. 

For now, investors appear to be rotating out of high-momentum tech and AI positions, pocketing profits after a historic run, while waiting to see if Fed Chair Powell’s upcoming interest rate remarks can re-ignite confidence.