tl;dr
US technology shares fell sharply on Tuesday amid renewed skepticism about the AI boom, leading the Nasdaq Composite to its largest one-day drop since August 1 and dragging the broader market down. Major tech firms like Palantir and Arm saw significant declines, with the Nasdaq down 1.4% and the S&P...
US technology shares slid on Tuesday in New York trading as fresh doubts about the artificial intelligence boom rippled through 2025’s biggest winners, pushing the Nasdaq Composite to its sharpest one-day fall since August 1 and dragging broader equities lower. Palantir, a major software company, dipped by 9.4%, whereas Arm, a growing chip designer, lost 5% in stock valuation. The tech-focused Nasdaq Composite edged lower by 1.4%, while the S&P 500 slipped by 0.7%.
Stock selling spilled into Asia on Wednesday. Japan’s Nikkei 225 fell by 1.8%, South Korea’s Kospi dropped by 1.9%, and Hong Kong’s Hang Seng index shed 0.6%, mirroring weakness on Wall Street. Traders pointed to a critical assessment published Monday by an MIT affiliate as a reason for the pullback. The researchers reported that “95 per cent of organizations are getting zero return” from their spending on generative AI, the technology that helped propel US stocks to record levels.
The latest bout of concern arrives seven months after China’s DeepSeek rattled markets by claiming AI advancements with significantly less computing power compared to US rivals. While shares later steadied, the episode underscored how sensitive investors remain to negative headlines. Declines were led by top performers Advanced Micro Devices and Oracle, which shed 5.9% and 5.4%, respectively. AppLovin, an advertising company focused on applications, lost 5.9%.
In the crypto markets, Bitcoin dropped by 2.7%, weighing on stocks linked with the broader crypto market, including Metaplanet and Strategy. Jacob Sonnenberg, a portfolio manager at Irving Investors specializing in tech, noted, “The market has been on fire, and today you saw a rotation out of a lot of the very hot, high-momentum names.”
DeepSeek’s January announcement about a high-performing new AI model raised questions about whether US companies can maintain their lead in AI and the demand for chips powering these systems. Although shares later recovered, the episode demonstrated how quickly market sentiment can shift. As big tech stocks fell, defensive sectors such as utilities, real estate, and consumer staples rose, with roughly 7 out of 10 S&P 500 stocks finishing higher.
Even with this setback, tech remains the engine of the market’s recent climb. The S&P 500 information technology sub-index has gained 14% since mid-May, driven by AI-linked names including Oracle and AMD.