AI fever led to significant rout in Nasdaq 100 Index
Alphabet increased capital expenditures to $13 billion for new data center infrastructure
Google faced challenges in robotaxi business contributing to 'Big Tech' downturn
Investors question ROI of AI investments due to required infrastructure expense
Nasdaq suffered $1 trillion loss on July 24, 2024
OpenAI could face losses up to $5 billion without further financing
Semiconductor companies like Nvidia, Broadcom, and Arm Holdings affected
Tesla's Q2 delivery figures came at the expense of margins
Artificial Intelligence (AI) fever took a turn for the worse on July 24, 2024, as investors soured on the technology and caused a significant rout in the Nasdaq 100 Index. The index suffered its worst day since October 2022, with losses totaling over $1 trillion. The sell-off was led by semiconductor companies such as Nvidia Corp., Broadcom Inc., and Arm Holdings Plc.
The Nasdaq indexes' tumble of more than 3% raised concerns about the substantial investments being made in AI and its potential return on investment (ROI). Some market professionals argue that the commercial hopes for AI are overblown, questioning the vast expense required to build out infrastructure needed for its computing and training.
Tesla's CEO, Elon Musk, revealed during earnings season that strong Q2 delivery figures came at the direct expense of margins. Alphabet also increased its capital expenditures to $13 billion, mainly for new data center infrastructure.
Despite these developments, OpenAI could face losses of up to $5 billion this year and may run out of funds in 12 months without further financing.
The sell-off affected other tech stocks as well. Google's earnings report showed that the company faced challenges in its robotaxi business, contributing to the overall downturn for 'Big Tech.'
Tesla failed to provide evidence that a combination of FSD price cuts and free trials translated into higher take rates.
Alphabet’s capital expenditures increased to $13 billion, mainly for new data center infrastructure, and spending on its robotaxi business would also increase.
OpenAI, the company behind ChatGPT, could face losses of up to $5 billion this year and may run out of funds in 12 months without further financing.
Accuracy
Tesla experienced its biggest one-day drop since September 2020, plunging 12%
Tesla's robo-taxi event was postponed from August 8 to October 10th
Investors are taking money off the table and cashing in their chips after a turbulent fortnight following an attempt on President Trump’s life.
The Nasdaq indexes tumbled more than 3% for the worst days since October 2022.
Tesla's CEO Elon Musk revealed that strong Q2 delivery figures came at the direct expense of margins.
Alphabet's capital expenditures increased to $13 billion, mainly for new data center infrastructure.
Accuracy
Tech stocks led by Tesla and Google parent Alphabet wiped a collective $1 trillion in value off U.S. equities, signaling a broad-based correction could be in store.
Investors are realizing that the payoff from hyperscalers’ AI spending will take time to materialize and is hurting their short-term earnings.
Tesla, a company trying to rebrand itself as an AI and robotics leader, experienced its biggest one-day drop since September 2020, plunging 12%.
Alphabet’s capital expenditures increased to $13 billion, mainly for new data center infrastructure, and spending on its robotaxi business would also increase.
OpenAI, the company behind ChatGPT, could face losses of up to $5 billion this year and may run out of funds in 12 months without further financing.
Deception
(30%)
The article contains selective reporting and sensationalism. The author focuses on the negative impact of tech stocks on the market without providing a balanced perspective. The title itself is sensational, implying that the sell-off was triggered solely by Big Tech's AI investments when in reality, it was a broader market correction. Additionally, there are instances of selective reporting where the author highlights only negative news about specific companies like Tesla and Alphabet without mentioning their positive developments.
Has the day of reckoning finally arrived?
Even as bulls like Wedbush Securities analyst Dan Ives have argued the AI party is only just beginning, Nicholas Colas of DataTrek Research told Investors Business Daily that expectations had run well ahead of reality.
Wednesday's rout in tech stocks led by Tesla and Google parent Alphabet wiped a collective $1 trillion in value off U.S. equities, signaling a broad-based correction could be in store.
Fallacies
(75%)
The author makes an appeal to authority when quoting Alec Young and Nicholas Colas. He also uses inflammatory rhetoric by stating 'Has the day of reckoning finally arrived?' and 'investors now appear to be taking money off the table and cashing in their chips especially after a turbulent fortnight.' These statements do not provide any evidence or logical reasoning for the fallacies being presented.
][Alec Young, chief investment strategist at Mapsignals,] told Bloomberg that investors realize that the payoff is going to take time to materialize and the hyperscalers' earnings are being hurt in the short term by how much they're spending on it.[
Nicholas Colas of DataTrek Research told Investors Business Daily in a July 12 article that expectations had run well ahead of reality.
Billionaire investor Ray Dalio, who made his fortune correctly predicting tectonic shifts in the global economy and geopolitical stage, emphasized the rising risks of a major conflagration on U.S. soil, especially should Kamala Harris win on election day.
Bias
(90%)
The author expresses a fear that spending by leading tech companies on AI may have gotten out of control and implies that the payoff is not materializing yet. He also mentions concerns about valuations being stretched to their breaking point and investors wanting to see concrete examples of profit growth. The author also quotes Nicholas Colas stating that expectations had run ahead of reality, implying a potential bubble in the tech sector.
Current valuations imply earnings will double, and in some cases double again, at U.S. Big Tech companies.
Even as bulls like Wedbush Securities analyst Dan Ives have argued the AI party is only just beginning, Nicholas Colas of DataTrek Research told Investors Business Daily in a July 12 article that expectations had run well ahead of reality.
Investors realize that the payoff is going to take time to materialize and the hyperscalers' earnings are being hurt in the short term by how much they're spending on it.
The company could not be reached by Fortune for a comment.
Two days later, a would-be assassin narrowly missed killing Republican nominee Donald Trump at a rally, spooking markets.
Investors soured on the promise of artificial intelligence (AI) on Wednesday, leading to a $1 trillion rout in the Nasdaq 100 Index.
The Nasdaq indexes tumbled more than 3% for the worst days since October 2022.
Accuracy
Tech stocks led by Tesla and Google parent Alphabet wiped a collective $1 trillion in value off U.S. equities, signaling a broad-based correction could be in store.
Investors are paying more to protect against swings in tech stocks due to options volatility on Nvidia and high premiums for puts on Broadcom Inc.
Some market professionals argue that the commercial hopes for AI are overblown, questioning the vast expense required to build out infrastructure needed for its computing and training.
Accuracy
The Nasdaq 100 Index experienced a $1 trillion rout on Wednesday due to investor concerns over the return on investment (ROI) of artificial intelligence (AI) infrastructure spending.
Tech stock valuations had moved into historically frothy territory with some tech giants still priced at nose-bleed levels despite the selloff.
Deception
(30%)
The article contains selective reporting as it focuses on the negative performance of certain tech stocks and AI companies without mentioning their positive developments or overall market context. It also uses emotional manipulation by using phrases like 'AI fever cools', 'rout', and 'violent selling' to create a sense of panic and fear among readers.
The Nasdaq indexes tumbled more than 3% for the worst days since October 2022.
Specifically, investors appear to be listening to growing chatter in some Wall Street circles that the AI rally that fueled a bubble that added $9 trillion in value to the S&P 500 in the past year is bound to burst.
The selloff sent a Bloomberg index of the so-called Magnificent Seven technology stocks down 5.9%, falling below its average price for the past 50 days for the first time since May.
Fallacies
(85%)
The author makes an appeal to authority by quoting Alec Young and Neville Javeri, implying their opinions hold weight. The article also contains inflammatory rhetoric with phrases like 'AI rally that fueled a bubble', 'bubble in AI names', and 'the AI rally that fueled a bubble that added $9 trillion in value to the S&P 500'. These phrases are used to create fear and uncertainty around AI investments.
> The overarching concern is, where is the ROI on all the AI infrastructure spending?<
> There’s a pretty insane amount of money being spent. Maybe it’ll pay off in a few years. But I think investors realize that the payoff is going to take time to materialize and the hyper scalers earnings are being hurt in the short term by how much they’re spending on it.<
> The makers of hardware used in AI computing suffered some of the biggest drops on Wednesday after soaring this year. Super Micro Computer Inc. dropped 9.15%. Nvidia fell 6.8%, and Broadcom Inc. lost 7.6%.<
> Talk of a bubble in AI names was fanned by activity in derivatives markets, where investors piled into bullish options on indexes and individual stocks, especially Nvidia, that acted as rocket fuel during the rally.<
