The so-called “Magnificent Seven” — Nvidia, Meta Platforms, Microsoft, Amazon, Tesla, Alphabet, and Apple — experienced their worst weekly losses since April, as investors questioned whether the AI boom and record-high valuations are sustainable. The S&P 500 and Nasdaq were also set for their worst weekly performances since March, while the CBOE volatility index, Wall Street’s “fear gauge,” reached a three-week high.
Optimism about AI has driven the market to record levels this year, but analysts warned that the sector’s reliance on debt to fund massive infrastructure projects may be creating vulnerabilities. John Higgins, chief markets economist at Capital Economics, told Times UK: “There is a concern about how sustainable all of this is going forward — the rollout of AI, the huge capital spending, and how companies are going to pay for it.”
The sell-off accelerated after Morgan Stanley and Goldman Sachs executives highlighted potential market pullbacks at the Global Financial Leaders’ Investment Summit in Hong Kong. Ted Pick, Morgan Stanley CEO, said a 10–15 per cent drawdown “should be welcomed if it’s not driven by some macro cliff effect,” while Goldman Sachs chief David Solomon warned that cycles can change investor sentiment unpredictably.
Investors were further unsettled by regulatory filings showing Michael Burry, the hedge fund manager dramatized in The Big Short, had wagered $1.1 billion against shares of Nvidia and AI analytics firm Palantir Technologies.
Broader economic worries compounded the tech sell-off. The preliminary University of Michigan consumer sentiment index fell to 50.3, the lowest reading since June 2022, largely due to a sharp decline in Americans’ assessment of current conditions. Market watchers also cited uncertainties from ongoing layoffs, mixed economic data, and the effects of the US government shutdown.
Jeff Buchbinder, chief equity strategist at LPL Financial, told Times UK: “The markets are flying a little bit blind. A lack of information combined with rising fears about jobs and growth is feeding volatility.”
The rapid gains and sudden setbacks in AI-driven stocks highlight the growing tension between technological ambition and financial realities, suggesting investors may be entering a more cautious phase for the sector.
