Technology stocks, particularly those focused on artificial intelligence (AI), have led stock market gains over the past few years.
This is because investors were eager to bet on this potentially game-changing space
AI demonstrated its ability to make companies and individuals more efficient, and over time, this could lead to significantly higher earnings. Certain companies, such as chip designer Nvidia and cloud service provider Alphabet, were early winners — generating explosive revenue growth — and investors piled into them, driving the shares higher too. For example, Nvidia and Alphabet saw their stock prices climb in the triple digits over the past three years.
All of this resulted in high valuations for many tech players, and late last year, investors worried about the sustainability of such levels. They also were concerned about the high levels of spending on AI and whether the revenue opportunity would justify that spending level. This, along with general worries about the economy and geopolitical environment, weighed on tech stocks early in the year.