Stocks closed sharply lower on Tuesday as fears of an artificial intelligence technology bubble hit markets for the fourth straight day.
The Dow Jones Industrial Average fell 498 points, or 1%, while the S&The P 500 fell 0.8%. The tech-heavy Nasdaq fell 1.2%.
The selloff, which has hit some of the world’s largest companies, marks a rare bout of turbulence on this year’s path toward higher returns.
In recent days, many investors have raised the alarm about technology companies’ dependence on AI. While big tech companies spend hundreds of billions to build the data centers needed to run this energy-intensive technology, the financial benefits remain uncertain.
“Tech companies are having to spend to keep up with growing demand, but that demand has largely not been converted into profits or productivity,” Callie Cox, chief market strategist at Ritholtz Wealth Management, told clients in a memo. “Investors are skeptical about profitability.”
Still, Cox added: “AI will likely pay off in economic benefits in the future, but those who are overexposed to the technology in their portfolios have to ride out this sell-off phase.”
An NVIDIA logo appears in this illustration, August 25, 2025.
Given Ruvic/Reuters, FILE
The Nasdaq plunged 3% last week, the index’s biggest weekly drop since the period after President Donald Trump’s “Liberation Day” tariffs in April. the&The P 500 ended three consecutive weeks of gains.
Market gains this year have been concentrated in a handful of tech giants, known as the magnificent seven: Alphabet, Amazon, Apple, Meta, Microsoft, Tesla and Nvidia. Concerns about artificial intelligence have poured cold water on stocks in recent days, causing their prices to falter.
Nvidia shares have fallen nearly 9% since late October, including a slight drop on Tuesday. Meta has decreased 17% over the last month.
Even after recent losses, the S&The P 500 will still rise 13% in 2025. While the Dow Jones Industrial Average is up 8% and the Nasdaq has soared 17%.
