{"id":17361,"date":"2026-06-23T22:32:12","date_gmt":"2026-06-23T22:32:12","guid":{"rendered":"https:\/\/siliconvalleymovingpost.com\/?p=17361"},"modified":"2026-06-23T22:32:12","modified_gmt":"2026-06-23T22:32:12","slug":"ai-stock-slump-raises-the-question-if-investors-are-just-taking-profits-or-getting-very-nervous","status":"publish","type":"post","link":"https:\/\/siliconvalleymovingpost.com\/?p=17361","title":{"rendered":"AI stock slump raises the question if investors are just taking profits or getting very nervous"},"content":{"rendered":"
\n

By ALEX VEIGA<\/strong><\/p>\n

Technology companies are spending big to incorporate artificial intelligence into their businesses and to build huge data centers. Investors who had jumped on the bandwagon appear to be having second thoughts.<\/p>\n

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Proponents of artificial intelligence see it as the next great revolution for the global economy. The revolution won\u2019t come cheap. Just four companies \u2014 Alphabet, Amazon, Meta Platforms and Microsoft \u2014 plan to spend up to $720 billion this year, primarily on AI data centers.<\/p>\n

This week, investors are looking at the huge sums being spent and questioning whether AI can produce the profits and productivity necessary to make all the investment worth it. Critics have been talking about the possibility of a bubble in AI investment. On Monday, Amazon and Alphabet fell about 5%.<\/p>\n

On Tuesday, several companies that make the chips needed for the data center buildup \u2014 Nvidia, Micron Technology, Broadcom and Lam Research \u2014 led the market lower.<\/p>\n

At first, Microsoft, Alphabet and other so-called hyperscalers turned to cash on hand to fund the AI expansion. But they\u2019re increasingly relying on the markets to raise cash.<\/p>\n

AI buildout needs cash<\/h4>\n

Alphabet, the parent company of Google, said earlier this month that it\u2019s raising $80 billion in cash to help pay for its investments by selling shares of its stock. Overall, Alphabet is planning to spend as much as $190 billion this year \u2014 more than all the stock of The Walt Disney Co. is worth, and Alphabet is forecasting its spending on investments next year will \u201csignificantly increase.\u201d<\/p>\n

In March, Amazon sold $54 billion of bonds in the U.S. and Europe as it plans to spend around $200 billion this year on AI investments.<\/p>\n

\n<\/div>\n

Elon Musk\u2019s rocket maker SpaceX was on a three-day skid heading into Tuesday. It regained some lost ground, but ended trading slightly below the closing price on its first day of trading on June 12. Musk acknowledges that SpaceX will have to spend heavily to fulfill its plans of sending AI data centers into space, and the company has announced that part of an upcoming bond offering will fund its AI buildout.<\/p>\n

High-priced chip companies<\/h4>\n

Chip companies have benefitted as the demand for memory chips and processing power for AI data centers and other projects has led to a supply shortage and a surge in prices. Investors have bid up the share prices of these companies now in anticipation of big profits down the road. By one measure, which compares a company\u2019s stock price to its earnings per share, these companies might look expensive.<\/p>\n

Marvell Technologies lost money for five straight years before turning a profit of $2.7 billion in the fiscal year ended in January, thanks to gains in its data center business. The stock has more than tripled so far this year and its price-to-earnings ratio has gone from about 30 at the start of 2026 to near 100.<\/p>\n

Some data storage companies have seen even more eye-popping gains. Sandisk shares have soared more than 700% year to date and its P\/E ratio stands at 68. Whether Sandisk shares are overvalued will depend on whether it meets Wall Street\u2019s lofty expectations for the next 12 months \u2014 earnings per share of $188.05 per share compared with $29.16 per share for the 12 months ended March 31. When the current stock price is compared to the forecast, the price-to-earnings ratio falls to around 11.<\/p>\n

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\n<\/div>\n

The current price-to-earnings ratio for the S&P 500 is around 25.<\/p>\n

On Tuesday, investors unloaded at least some of their holdings in these stocks. Sandisk sank 13.6%, while Marvell lost 9.4%.<\/p>\n

The sell-off also took a bite out of exchange-traded funds, or ETFs, that invest heavily in tech stocks. The Invesco QQQ Trust Series ETF was down 3.3%, while iShares Semiconductor ETF slumped 7.9%.<\/p>\n

Pocketing some gains<\/h4>\n

While some investors may have doubts that companies going full throttle on AI infrastructure spending will ultimately be able to generate profits to justify their investment, it\u2019s likely some of the selling this week may be investors pausing to pocket some of their gains after the stock market\u2019s recent string of all-time highs.<\/p>\n

\u201cWith no clear catalyst driving the move lower, we believe today\u2019s pullback likely reflects profit-taking following a strong rally from the March lows,\u201d said Brock Weimer, an investments strategy analyst at Edward Jones.<\/p>\n

Big Tech gains have powered major stock indexes on record-setting runs this year. Within the S&P 500, the tech sector alone is up nearly 27% just over the last three months and roughly 17% for the year. In Asia, South Korea\u2019s Kospi has nearly doubled so far in 2026.<\/p>\n

Heavy selling on Tuesday triggered a halt in trading in the Kospi, which set the stage for the wave of tech stock selling when trading opened in U.S. markets, Wedbush analyst Dan Ives wrote in a research note Tuesday.<\/p>\n

Overall AI enterprise demand in Asia is \u201cshowing no cracks in the armor, which continue to make us very bullish on owning the tech AI winners over the coming year,\u201d he added.<\/p>\n

Still, tech companies\u2019 race to invest in the expansion of AI infrastructure could ultimately be sowing the seeds of future oversupply, according to Philip Straehl, chief investment officer at Morningstar Wealth.<\/p>\n

\u201cPeriods of elevated capital investment have historically not translated into strong outcomes for investors, leaving us cautious on the outlook,\u201d Straehl wrote in a report last week.<\/p>\n

He expects that the rapid expansion of AI computing power will weigh on pricing, hurting companies\u2019 returns and eventually result in a pullback in investing. Semiconductor companies are \u201cparticularly exposed to this dynamic,\u201d Straehl wrote.<\/p>\n

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Tech companies are spending big on AI, but investors might be getting nervous.<\/p>\n","protected":false},"author":1,"featured_media":17360,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-17361","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-business"],"yoast_head":"\nAI stock slump raises the question if investors are just taking profits or getting very nervous - Silicon Valley Moving Post<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/siliconvalleymovingpost.com\/?p=17361\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"AI stock slump raises the question if investors are just taking profits or getting very nervous - 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