Shares of Apple and those other major technology companies were falling early on Monday, with the wider market also selling off. Skepticism over the returns on investment in artificial-intelligence technology looks to be growing alongside fears over the U.S. economy.
Apple stock was down 4.6% in morning trading, in a significant reversal from the previous week when the iPhone maker was steady even as other tech stocks fell following a weaker-than-expected U.S. jobs report.
Apple was likely being particularly hit by news that Warren Buffett’s Berkshire Hathaway slashed its stake in the company by nearly 50% in the second quarter, according to a filing on Saturday. That punctured enthusiasm around Apple’s plans to integrate AI into its devices, which investors and analysts have backed to boost iPhone sales.
However, the hurt was hardly confined to Apple. Among other large tech stocks, Google-parent Alphabet was falling 3.2%, Facebook-owner Meta Platforms was down 3.2%, Amazon.com was lower by 3.9%, and Microsoft was dropping 3.o%.
That looks like a more widespread shift in sentiment around the sector, which has been powered by enthusiasm over AI for nearly two years. While Big Tech earnings were mixed last week, a consistent trend of higher capital expenditures associated with AI technology has left investors impatient for returns.
Skeptical voices over AI look to be getting louder. Hedge fund Elliott Management told investors that large technology stocks were in “bubble land” and that AI is “overhyped with many applications not ready for prime time,” according to the Financial Times, citing a letter to clients.
Elliott didn’t immediately respond to a request for comment early on Monday.
The question now is whether the hefty valuations assigned to tech companies will continue to shrink or whether their continued healthy cash flows and profitable core businesses will support the stocks until they can begin to show more-tangible results from AI investment. The next major inflection point for the AI narrative could come with Nvidia’s earnings report on Aug. 28.
“The swift change in market mood regarding AI…looks premature, in our view,” wrote Min Lan Tan, head of the Asia Pacific Investment Office at UBS Global Wealth in a research note on Monday. “It will likely take some time for companies to demonstrate that they can earn a return on their AI investments, but there are no indications that companies are backing away from these investment plans given the technology’s promise.”
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Originally Posted August 5, 2024 – Apple Stock Leads Big Tech Drop. Worries About an AI Bubble Are Back.
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