Concerns on Wall Street about the returns from technology giants' massive artificial intelligence (AI) investments are continuing to build, and the Nasdaq 100 index slipped into a technical correction on Monday, the third such occurrence this year.
Recently, several large technology companies have released disappointing earnings or guidance one after another, further undermining investor confidence in AI-related stocks.
On Monday, the Nasdaq 100 fell 1.4% to 27,989.82 points, bringing its cumulative decline from the record high set on October 6 to more than 10%, meeting the standard commonly used by the market to define a technical correction.
Despite the recent sell-off, the index is still up about 11% so far in 2026.
However, having fallen into correction territory three times this year highlights how repeatedly investor attitudes toward the outlook for AI investment have shifted, and market volatility in technology stocks has clearly intensified.
The core driver of this round of technology stock selling is growing concern about the cost of AI infrastructure buildout and the payback period for those investments.
In recent years, large technology companies have continued to spend hundreds of billions of dollars building AI data centers, purchasing chips and expanding computing capacity.
Yet as capital expenditure keeps climbing, investors have begun to question how long it will take for these enormous investments to translate into sufficient revenue and profit.
The recent earnings reports from technology giants have further amplified such worries.
Alphabet (NASDAQ: GOOGL, NASDAQ: GOOG), Google's parent company, last week reported advertising and search revenue below market expectations, sending its shares down by the largest single-day margin since its listing.
Meanwhile, Meta (NASDAQ: META) and Amazon (NASDAQ: AMZN) also suffered notable selling after releasing their latest quarterly results.
The market worries that these companies, on the one hand, need to keep pouring huge amounts of money into developing AI, while on the other hand they have yet to fully prove that the related investments can generate returns commensurate with the scale of spending.
Brian Culpepper, portfolio manager at James Investment Research, said investors are uneasy about the ever-increasing spending by technology giants.
"People are starting to get anxious about these companies spending, spending and spending again," he said.
Still, he believes the recent decline in technology stocks does not mean the AI investment boom is over; rather, market expectations had previously been overly optimistic and some stock valuations had risen too quickly.
"I don't think the AI investment boom is over, but it did get ahead of itself," Culpepper said.
Culpepper noted that U.S. stocks overall have performed quite strongly this year, but that has also led many stocks to rise too much, especially when the AI theme now involves so many listed companies, making related shares more prone to excessively high valuations.
It is worth noting that this round of selling has not been limited to the so-called Magnificent Seven U.S. technology giants.
During this earnings season, several technology companies suffered historic share price declines because their business outlooks fell short of expectations.
Among them, chipmaker Intel (NASDAQ: INTC) and enterprise software company ServiceNow (NYSE: NOW) both saw record sell-offs after issuing disappointing guidance, showing that investors are raising their demands for the future growth prospects of technology companies.
Previously, the market was broadly willing to pay high valuations for the long-term growth potential of AI-related companies, but as capital expenditure by technology giants continues to rise, investors are paying closer attention to actual profitability, cash flow performance and future business guidance.
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