Weekly AI Bubble Watch: What Stocks Will Do After AI Euphoria Fades




For over a year, the S&P 500 (SPY) and Nasdaq (QQQ) relied on heavyweight technology names to lift the index. Microsoft (MSFT) rose, followed by Meta Platforms (META), Apple (AAPL), and more recently, Amazon.com (AMZN).

Amazon is reportedly considering allowing Chinese retailers back on its platform. This hurts consumers, who would end up buying poor-quality goods, albeit at low prices. Markets sold shares of PDD (PDD), Alibaba (BABA), and JD.com (JD) in reaction to the news.

Stock markets need new leadership. The euphoria for AI stocks is rapidly losing momentum. It likely peaked after Nvidia (NVDA) split its stock. Shortly afterward, Broadcom (AVGO) announced a stock split. But sentiment changed on Thursday. Micron issued a sales forecast that did not justify its 98% one-year return.

Before Micron issued its outlook, markets previously overlooked the demand side for AI. Sales of AI servers lifted the downstream market. That included Dell (DELL), HP Inc. (HPQ), and networking firms. However, customers who buy AI-related hardware have yet to measure the return on investment.

Chances are high that customers who did not ask how the Chatbot will drive sales higher and cut internal costs. They are buying hardware first and implementing solutions later. This increases the risk of panic-selling for AI-related names.



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