American AI companies lost nearly $1 trillion in market value since last Friday, marking the worst week for tech companies since U.S. President Donald Trump imposed tariffs in April.
The combined market value of the eight most valuable companies in the AI market, including Nvidia, Meta, Palantir, and Oracle, fell by approximately $800 billion, according to The Financial Times.
This led to a weekly decline of 3% in the Nasdaq Composite technology index, marking the worst performance since the index dropped by 10% after Trump initiated a trade war by announcing tariffs in April.
"Capital expenditures related to AI are substantial and increasingly financed through borrowed funds, reminiscent of the crazy tech bubble of 2000, full of questionable investments," said Florian Ielpo, head of macroeconomic research at Lombard Odier Investment Managers.
Last week, Alphabet, Amazon, Meta, and Google reported a combined capital expenditure of $112 billion in the third quarter. At the same time, the AI sector requires hundreds of billions of dollars to fund its further development.
JPMorgan reported that retail traders, known for frequently buying stocks during market downturns, decided to refrain from purchases this week. Investor concerns about sky-high valuations of Silicon Valley tech companies have intensified amid emerging signs of a weakening U.S. labor market and declining consumer confidence in the world’s largest economy.
"The risk of recession may be right in front of us," said Mike Zigmont of Visdom Investment Group.
Nvidia, the most valuable company in the world, suffered the most, reducing its market capitalization by approximately $350 billion in just over a week since it became the first company to exceed a $5 trillion valuation. Microsoft, Oracle, and Broadcom also faced losses, although the market stabilized by the end of trading on Friday.
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