Big · stocksUS stocks slide after Altman warns of ‘bubble’ in AI and MIT study doubts the hypeBy Beatrice NolanBy Beatrice NolanReporterBeatrice NolanReporterBeatrice Nolan is a reporter at Fortune covering .
Beatrice previously worked as a reporter at Insider, covering stories AI and Big .
She's based in Fortune's London office and graduated from the University of York with a bachelor's degree in English.SEE FULL BIO Investors’ long-running enthusiasm for artificial intelligence showed signs of faltering on Tuesday as stocks tumbled.Investor enthusiasm for artificial intelligence wavered Tuesday as major stocks sold off.
Nvidia dropped 3.5% and Palantir nearly 10% after an MIT study claimed 95% of companies see no returns from generative AI, while OpenAI’s Sam Altman warned of a potential bubble.
Nasdaq futures were down this morning, premarket. Investors’ long-running enthusiasm for artificial intelligence showed signs of faltering late Tuesday and early Wednesday morning as stocks tumbled.
Nasdaq 100 futures were off 0.2% this morning, premarket. Nvidia, fresh off becoming the world’s first $4 trillion company, sank 3.5%, while Palantir slid nearly 10%.
The sell-off appeared to be sparked in part by an MIT report that claimed 95% of companies in generative AI are seeing no returns, and was potentially deepened by earlier s from OpenAI’s Sam Altman suggesting investors may be caught in an AI bubble.
Late last week, Altman drew a parallel between today’s AI frenzy and the 1990s dotcom bubble, when internet company valuations spiked dramatically before crashing.
And while the MIT study attributed failures to corporate “learning gaps” and flawed integration rather than actual AI model quality, the market reaction highlights growing concerns AI’s commercial viability.
The Nasdaq logged its steepest drop since August, and the rout quickly spread overseas. Korea’s SK Hynix, one of Nvidia’s key suppliers, lost 2.9%, while chip giant TSMC slipped 4.2%.
SoftBank, long bullish on AI, cratered more than 7%. However, Alibaba and Tencent barely dipped, and China’s chipmaking champion SMIC even popped 3%.
“ stocks were under pressure yesterday, led by AI poster child stocks Palantir and Nvidia as investors worry the rally is due for a pullback/correction with the constant valuation arguments front and center,” Wedbush’s Dan Ives wrote in a note on Tuesday.
“We are still in the early days of the AI Revolution as the use cases are just starting to massively expand as more companies recognize the value creation being driven by a handful of companies led by the Godfather of AI Jensen and Nvidia.” Concerns that investment in AI is racing ahead of sustainable growth are not new.
High-file figures, including Alibaba cofounder Joe Tsai and Bridgewater Associates founder Ray Dalio, have cautioned against the pace of the boom.
Dalio has also ned today’s Wall Street cycle to the run-up to the dotcom crash of the late 1990s. “There’s a major new nology that certainly will change the world and be successful.
But some people are confusing that with the investments being successful,” he told the Financial Times earlier this year. Others see the risks as even greater.
Apollo Global Management chief economist Torsten Slok argued last month that the AI surge could eclipse the internet bubble of the 1990s, pointing out that the 10 largest companies in the S&P 500 are now more overvalued relative to fundamentals than they were at the height of the dotcom era.
Introducing the 2025 Fortune Global 500, the definitive ranking of the biggest companies in the world. Explore this year's list.