Wall Street reassesses the AI trade
The recent pullback on Wall Street has been concentrated in areas that had benefited most from the artificial intelligence boom. The Nasdaq Composite and S&P 500 have both come under pressure as investors reassess the scale of spending required to build AI infrastructure and question whether the expected returns can keep pace with valuations.
The sell-off has not been limited to chipmakers. Memory and processor names such as Micron Technology and SanDisk have also come under pressure, while the broader weakness has spilled into software stocks including Salesforce and Palantir. That suggests investors are no longer treating every AI-linked business as an automatic winner.
AI costs move into focus
For much of the past two years, markets were willing to look through rising expenditure because AI was seen as a potential source of future monopoly-like returns. That narrative is now being tested more closely.
Building data centres, securing advanced memory chips, buying graphics processors and sourcing large amounts of power all require substantial capital. The costs are immediate, while the mass-market revenue opportunity from AI remains harder to measure. That gap is becoming more difficult for investors to ignore.
Software stocks face a sharper question
The reassessment is particularly important for software companies. Earlier in the AI cycle, investors expected automation tools to help businesses write better code, improve productivity and support higher subscription pricing.
