Tech giants, known as the “Magnificent Seven,” are facing potential declines as investor enthusiasm wanes due to unmet expectations in AI development.
Points
- The “Magnificent Seven” tech stocks, including Apple, Microsoft, and Nvidia, may see reduced investor interest due to slower-than-expected AI advancements.
- Disappointment stems from AI’s minimal impact on reducing human labor costs.
- Overinvestment in AI infrastructure might lead to longer cost recovery periods, causing companies to slow down AI-related spending.
- The decline in these tech stocks could also negatively impact Bitcoin and other cryptocurrencies.
Recent data suggests that the bullish momentum driving the “Magnificent Seven” tech stocks might be tapering off. The group, which includes industry titans like Alphabet, Amazon, and Nvidia, has enjoyed strong performance throughout the year. However, investor disappointment in the pace and impact of artificial intelligence （AI） developments is now casting a shadow over their future prospects.
Sandeep Rao, a senior researcher at Leverage Shares, highlighted a crucial issue: AI has not delivered the expected cost savings in human labor. Despite heavy investments in AI, companies have not seen significant reductions in labor expenses, leaving investors disillusioned. This disillusionment could prompt investors to reallocate their portfolios, seeking out other long-term opportunities beyond the tech giants.
Adding to the concerns is the oversupply of AI models, which far exceeds the current capacity needed to power the global internet. This excess could prolong the time required for tech giants to recoup their AI investments. Rao predicts that these companies may soon adopt a more cautious approach to AI spending, focusing on milestone-driven progress rather than aggressive expansion. This shift could further dampen investor enthusiasm, especially as the fear of missing out （FOMO） on AI investments begins to fade.
In the last month, all “Magnificent Seven” stocks experienced declines, with Tesla taking the hardest hit, losing over 21% of its value. Nvidia, despite leading in year-to-date gains, also saw a significant drop of over 20%. The declining performance of these tech stocks could have broader implications, particularly for the cryptocurrency market. Akshay Nassa, founder of Chimp exchange, notes a well-documented correlation between tech stock performance and cryptocurrency values. A continued decline in the “Magnificent Seven” could lead to decreased investor confidence in riskier assets like Bitcoin.
Moreover, Bitget Wallet’s COO, Alvin Kan, warns that further losses in major tech stocks could lead to a flight from even more volatile assets, including cryptocurrencies. As investors seek to minimize risk, Bitcoin and other digital currencies may face additional downward pressure.
解説
- The “Magnificent Seven” stocks have been a cornerstone of tech market performance, but their reliance on AI advancements is proving to be a double-edged sword. While AI was expected to revolutionize industries and significantly reduce operational costs, the reality has been more complex. AI development has yet to achieve the level of efficiency that could replace significant portions of the human workforce, leading to unmet expectations.
- The oversupply of AI models is another issue contributing to the current market sentiment. With more models than the global infrastructure can currently support, companies are finding it challenging to justify the massive AI-related expenditures. This has led to a cautious approach, where firms are likely to scale back on AI investments, focusing only on projects with clear, short-term milestones.
- For the broader market, especially cryptocurrencies, the ripple effect could be significant. As tech stocks falter, the already volatile crypto market could see increased selling pressure, as investors move towards safer assets. This situation underscores the interconnectedness of modern markets, where shifts in one sector can have far-reaching impacts on others.