Investors rotate out of tech stocks amid doubts over timing and returns on artificial intelligence investments by major firms.
Technology stocks declined Monday as skepticism over artificial intelligence profitability and escalating US-Iran tensions drove a broader market pullback. The sector saw significant rotation last week as investors questioned when Big Tech’s massive AI infrastructure spending would yield returns, with some analysts warning of potential market risks if payoffs are delayed.
SK Hynix and other chipmakers led losses, while Meta’s recent announcement of new AI-driven revenue streams, including a cloud business and updated AI model, failed to sustain momentum after a 6% Friday gain. The focus now shifts to Taiwan Semiconductor Manufacturing Company’s earnings report on Thursday, which could signal AI demand trends and impact shares of key customers like Nvidia.
TSMC’s June revenue surged 68% year-over-year, setting expectations for a strong quarterly result. However, any surprises in AI demand could act as a catalyst for the sector, which remains under scrutiny for its long-term profitability outlook.