Wall Street sells off tech stocks as AI spending faces scrutiny
The Nasdaq erased about $776 billion as chip stocks sank and investors stopped rewarding AI spending without proof of returns.
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Nvidia, Alphabet and a raft of chip names fell hard on Tuesday as the Nasdaq and S&P 500 closed at more than one-week lows, wiping out about $776 billion in market value in a single session. The selloff turned a months-long AI rally into a reality check, with investors no longer willing to treat massive capital spending as a guarantee of higher valuations.
The Philadelphia SE Semiconductor index tumbled 7.9%, while the S&P 500 information technology sector fell 3.7%. The Nasdaq Composite was down about 1.7%, and futures tied to the index had been off 2% earlier in the day, signaling how quickly the mood had turned against the market’s most crowded winners. Intel, AMD, Broadcom, Tesla and Alphabet were among the biggest decliners, and the pressure spread from U.S. technology shares into global markets.
At the center of the selloff was a sharper demand for proof. For months, Wall Street had rewarded companies for pledging ever-larger AI budgets, but investors are now asking whether the buildout will produce faster revenue growth, fatter margins and durable business models. That scrutiny has intensified as much of consumer AI use still runs on free versions such as ChatGPT and Claude, making monetization harder to judge and leaving shareholders to wait for evidence rather than promises.
Alphabet has become a key test case. The company said in February that it expected 2026 capital expenditures of $175 billion to $185 billion, then later raised the forecast to $180 billion to $190 billion. Across the biggest AI spenders, reported 2026 capital outlays by Alphabet, Amazon, Meta and Microsoft have clustered in the roughly $650 billion to $700 billion range, underscoring how much cash is being pushed into data centers, chips and power capacity before those investments have clearly paid off.
The broader backdrop did not help. Investors were also bracing for a more hawkish Federal Reserve, adding rate anxiety to the selloff in memory and chip stocks that reached well beyond the United States and hit South Korea as well. The message from the market was blunt: AI spending may still drive the next phase of tech growth, but it is no longer enough on its own to keep stocks aloft.
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