AI Profit Proof Demand

"They've been veering up and down this summer on worries that their prices shot too high in the AI frenzy and that the strong demand for memory, processors and other building blocks of data centers may fizzle out if AI proves less profitable than promised."

"Valuations are often just expectations of future growth, not evidence of current earnings. Investors concerned about volatility may also favor lower-beta stocks, which tend to be less sensitive to broad market swings and speculative enthusiasm."

"What we're seeing today doesn't mean the technology or artificial intelligence story is over. Many of these companies have been reporting exceptionally strong earnings, but investors are no longer prepared to pay any price for this growth. They're becoming more discerning about whether companies can maintain the pace of such strong earnings growth."

"In July, chief executive officer Lisa Su rolled out new products that the company said will outperform offerings from Nvidia, adopting a more aggressive stance in a market it predicts will reach US$1.4 trillion by 2030. That further raised already lofty investor expectations."

"Yet, its shares fell more than 7% in extended trading, suggesting that investors were looking for an even stronger outlook after the stock more than doubled this year spurred on by AI optimism. AMD is now in a similar position to Nvidia and the hyperscalers, where investors are looking for evidence that AI infrastructure investments will continue translating into accelerating returns."

"The Nasdaq 100 Index is on track to enter a correction as worries about the eventual payoffs from artificial intelligence investments sour sentiment in the technology giants that have powered most of this year's stock-market advance."

"But now investors have serious questions over how long the AI spending boom can continue, and whether the huge profits needed to pay for the trillions of dollars going into data centers will ever emerge."

"Investors will also watch earnings from the biggest tech firms, after a recent AI stock sell off revived doubts about whether the huge sums spent on infrastructure will pay off."

"This year's market gains have heavily relied on AI-linked stocks, so the recent downturn in key players like Alphabet and Tesla has spurred investor apprehension. Alphabet's increased AI expenditure set a worrisome precedent ahead of more earnings announcements."

"Wall Street is now sobering up to the fact that the era of unlimited AI spending may be ending. For the first time since the boom began, investors care less about who is spending the most and more about who is actually making money from it."