Tech stocks are experiencing a significant downturn, with the Nasdaq Composite falling 4% this week, marking the worst performance since April. Investor apprehension is growing due to concerns that valuations, particularly in the AI sector, have become excessively high and detached from underlying fundamentals. This correction follows warnings from Wall Street executives about a potential market pullback.
Several major tech companies have seen notable declines, including Nvidia, Microsoft, Amazon and Palantir. The AI boom, which had been driving market gains, is now facing increased scrutiny as investors question whether investments in AI will translate into tangible profits. The concentration of market capitalisation in a small number of tech companies has also raised concerns about market stability.
Adding to the negative sentiment, recent data revealed a surge in layoffs, reaching the highest level in 22 years, further fuelling worries about potential impacts on consumer spending and corporate earnings. The ongoing US government shutdown has also contributed to market uncertainty by disrupting the release of key economic data.
