According to Futurism, AI stocks experienced a sharp decline on Tuesday with Nvidia dropping nearly 4%, AMD falling almost 3%, and Palantir taking the hardest hit at over 9% despite beating Q3 earnings expectations. The selloff comes after the S&P 500 rose over 20% in the last six months only to decline nearly 2% in the last five days. Experts point to concerning price-to-earnings ratios, with Palantir trading at over 200 times forward earnings. Ameriprise strategist Anthony Saglimbene warned investors are questioning whether profit growth can justify massive capital expenditure investments. Meanwhile, Goldman Sachs’ David Solomon predicted a 10-20% market drawdown within 12-24 months, and Meta shares dropped over 16% in five days after Zuckerberg announced increased AI spending.
Sponsored content — provided for informational and promotional purposes.
The reality check is here
Here’s the thing about hype cycles – they always end. And we’ve been in one of the biggest AI hype cycles we’ve seen in years. Companies have been pouring hundreds of billions into AI infrastructure while revenues lag way behind. It’s like building the world’s most expensive restaurant in a town where nobody can afford to eat there.
What’s really telling is that even good news isn’t enough anymore. Palantir beat earnings expectations and still got hammered. That’s a classic sign that investors are looking past current performance and worrying about future growth. When your valuation is 200 times earnings, you need to deliver absolutely spectacular growth just to stand still.
Big Short vibes
Now we’ve got Michael Burry – yes, that Michael Burry from The Big Short – placing bets against Palantir and Nvidia. According to recent reports, he’s shorting two of the companies that have been at the absolute center of the AI boom. That’s either incredibly bold or completely crazy.
But here’s what makes this interesting. Burry has a track record of spotting bubbles before they pop. He saw the housing crisis coming when everyone else thought prices would keep rising forever. So when he starts betting against the darlings of the AI revolution, people should probably pay attention.
CEO pushback
Of course, not everyone agrees with the skeptics. Palantir CEO Alex Karp called Burry’s bets “bats*** crazy” and pointed out that he’s shorting the companies that are “making all the money.” And he’s got a point – these companies are generating revenue, just maybe not enough to justify their astronomical valuations.
The question isn’t whether AI is real or valuable – it clearly is. The question is whether the current stock prices reflect realistic growth expectations or pure speculation. When Meta announces more AI spending and their stock drops 11% in a day, that tells you investors are getting nervous about the return on these massive investments.
What’s next for AI stocks?
So are we looking at a minor correction or the beginning of something bigger? The truth is probably somewhere in between. We’ve seen this movie before with the dot-com bubble, the crypto boom and bust, and countless other technology cycles.
The companies with real business models and sustainable growth will likely recover. The ones riding purely on hype might not be so lucky. And with the entire US economy leaning so heavily on tech stocks lately, a significant AI correction could have ripple effects far beyond Silicon Valley.
Basically, the free money party might be ending. Investors are finally asking the tough questions about when all this AI investment will actually pay off. And if the answers aren’t convincing enough, we could be in for more turbulence ahead.
