Tech stocks head south as investors see that growth in AI is not limitless

The Nasdaq 100 closed down for the month of August (-0.16%) even though the broader S&P 500 was up 3.56%.

Tech stocks were dogged all month by discussion about whether AI was in a bubble. And a study by MIT suggested that 95% of companies have yet to see a return on their investment in AI.

As Jim Reid and his team of analysts at Deutsche Bank said this morning: “Nvidia (-3.32% on Friday) was a major driver of this softness, losing ground after Marvell Technology’s outlook raised doubts over demand for data-centre equipment and as China’s Alibaba unveiled a new AI Chip. Last Wednesday, Nvidia’s results delivered a modest quarterly beat but saw slowing revenue growth for the data centre division, in part due to a pause in sales of AI chips to China.”

Marvell Technology is based in Santa Clara, California, and makes semiconductor chips. It has a partnership with Nvidia. On its fiscal Q2 2026 earnings call on August 28, CEO Matt Murphy said, “We expect overall data center revenue in the third quarter to be flat sequentially.” Flat is not up, and that sent Marvell’s stock down 19% the next day. (In May, Marvell cancelled its investor day presentations, citing macroeconomic uncertainty.)

That disappointment came after Nvidia’s earnings call the day before. The company reported robust data center revenue growth, but it was nonetheless below analyst expectations.

And then there is Super Micro Computer Inc., another chipmaker buoyed by the AI boom. In early August, it reduced its revenue outlook for the year to $33 billion. Back in February, it had estimated $40 billion. On top of that, on August 28th, the company said in its annual report, “We have identified material weaknesses in our internal control over financial reporting, which could, if not remediated, adversely affect our ability to report our financial condition and results of operations in a timely and accurate manner.” Its stock fell 5.5% after that and was down 27% for the month.

Shakiness in AI stocks could have consequences for the broader market. The “Magnificent 7” tech companies (Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia, and Tesla), which have all placed large bets on AI, are currently worth 34% of the entire market cap of the S&P 500.

Here’s a snapshot of the markets globally this morning:

• S&P 500 futures were up 0.1% this morning. U.S. markets are closed for Labor Day.
• STOXX Europe 600 was up 0.19% in early trading. 
• The U.K.’s FTSE 100 was up 0.08% in early trading.
• Japan’s Nikkei 225 was down 1.24%.
• China’s CSI 300 was up 0.6%. 
• The South Korea KOSPI was down 1.35%.
• India’s Nifty 50 was up 0.81% before the end of the session.
• Bitcoin fell to $109.3K.