AI Stocks Slump as $720 Billion Spending Spurs Profitability Fears
Updated
Updated · Los Angeles Times · Jun 26
AI Stocks Slump as $720 Billion Spending Spurs Profitability Fears
3 articles · Updated · Los Angeles Times · Jun 26
Summary
Sandisk plunged 13.6% and Marvell dropped 9.4% Tuesday as investors sold AI-linked shares, pulling the iShares Semiconductor ETF down 7.9% and the QQQ off 3.3%.
The selloff followed growing doubts that massive AI outlays can earn adequate returns, with Alphabet, Amazon, Meta and Microsoft planning up to $720 billion in spending this year, largely on data centers.
Funding needs are also rising: Alphabet is raising $80 billion and Amazon sold $54 billion of bonds in March, signaling hyperscalers are leaning more on capital markets to finance expansion.
Valuation worries have sharpened after huge gains—Marvell's P/E neared 100 and Sandisk shares had soared more than 700% this year—though some analysts said the drop also reflected profit-taking after record highs.
The retreat adds to a broader debate over whether the AI buildout is becoming oversupplied, with Morningstar warning heavy semiconductor investment could eventually pressure pricing, returns and future spending.
As AI stock gains evaporate, will upcoming trillion-dollar IPOs from OpenAI and Anthropic find Wall Street's pockets are now empty?
AI giants bet $720B on a productivity boom, but the economy hasn't budged. Is this 2026's version of the dot-com bubble?
The $7.6 Trillion AI Build-Out: June 2026 Stock Slump, Systemic Risks, and the Future of Tech Markets
Overview
In June 2026, AI-related stocks saw a sharp downturn, causing immediate concern in financial markets as investors rushed to understand the sudden shift. This broad sell-off was mainly driven by profit-taking, with many investors cashing in on gains made since March. The cautious mood was fueled by unprecedented capital spending by major tech companies on AI infrastructure and rising doubts about whether these massive investments would be profitable. As short-term gains were secured amid uncertainty, the market’s focus shifted from excitement over AI’s potential to careful evaluation of financial risks and returns.