Carmen Reinicke
Artificial intelligence could wipe us all out. Or it might just kill our unwanted subscriptions.
Those are the two extremes Wall Street has swung between over the past two weeks, sending hundreds of billions of dollars sloshing out of โ and then back into โ AI-exposed stocks while fraying the nerves of investors scrambling to keep up.
โThis has been a narrative market and the narrative changes every other week,โ said Nancy Tengler, chief executive at Laffer Tengler Investments.
It started on September 12, when Anthropic chief executive Dario Amodei called for a slowdown in development of cutting-edge AI models, which was quickly backed by OpenAI chief executive Sam Altman and SpaceX chief executive Elon Musk. The moves seemed to validate a series of recent warnings from within the industry about existential risks posed by the technology.
The response in the sharemarket was swift. On the first trading day after Amodeiโs essay was published, AI infrastructure stocks tumbled, as investors worried that hitting the brakes on development would mean less spending on computing equipment. The tech-heavy Nasdaq 100 Index dropped 1.5 per cent between September 14 and 15, erasing more than $US600 billion ($850 billion) in market value.
But those fears vanished last week as excitement about the popularity of Meta Platformsโ Muse personal assistant sent traders rushing back into AI-exposed stocks.
Meta shares jumped 11 per cent on Monday last week, putting the Facebook and Instagram parent on pace for its best month in more than a decade, after struggling for much of the year amid concerns that heavy spending on AI wouldnโt pay off.
Intel and Advanced Micro Devices each rallied more than 9 per cent. The Philadelphia Stock Exchange Semiconductor Index, known by its ticker SOX, gained 6 per cent on Monday and Tuesday last week, helping to push the Nasdaq 100 to its first record since early June.
It also triggered sell-offs in the shares of companies that rely on recurring bills and negotiable pricing as AI agents are expected to improve at tasks such as price comparison, trip bookings and customer service interactions. Insurer Allstate fell 8.9 per cent for the week, while cable-provider Charter Communications sank 12 per cent and Planet Fitness, 14 per cent.
Still, by the end of the week, $US3 trillion had been added to the Nasdaq 100 since the September 15 low.
โThe moves are staggering in both directions,โ said Rhys Williams, chief strategist at Wayve Capital Management. โItโs hard to explain from a fundamental point of view.โ
Sentiment swings
Of course, rapid changes in sentiment are nothing new in this market, which has been propelled higher by AI for nearly four years. In early 2025, fears about a pullback in spending sparked by a DeepSeek AI model, developed on the cheap in China, caused semiconductor stocks to plunge. Nvidia, which dominates the market for AI chips, dropped 17 per cent in a single day.
While those fears proved to be misplaced, AI has only got more important for the market and the economy, with spending from tech giants and AI start-ups ballooning. And thatโs giving investors itchy trigger fingers, especially when it comes to AI disruption.
The Muse-driven sell-off had echoes of earlier this year when releases of AI tools from Anthropic sent shares in a broad range of industries tumbling, from software-as-a-service companies to asset managers.
But when it comes to AI spending, investors are grappling with other risks in addition to safety. Interest rates are soaring, making the cost of AI development more expensive. And thereโs a rising backlash against data centres.
Fears about that flow of money slowing down have been most apparent in semiconductor stocks. After doubling from the start of the year through June 22, the SOX tumbled 29 per cent to a July 29 low. While the index has staged a rebound, it remains down 13 per cent from the June peak.
Cheaper valuations
The sell-off has knocked a lot of the froth out of stock prices, leaving many of the companies poised for more gains, according to JoAnne Feeney, a portfolio manager at Advisors Capital Management.
โYou donโt have to believe that this pace of growth is going to continue for five years in order to own companies like Nvidia or Broadcom and some of the others because their valuations have really come in,โ said Feeney, whose firm holds shares of both companies. โWe may very well be positioned for renewed interest in the key contributors to the AI infrastructure build-out.โ
Nvidia shares recently hit their cheapest valuation in more than a decade. At less than 17 times profit expected over the next 12 months, the stockโs multiple is half what it commanded in 2025, according to data compiled by Bloomberg.
Other investors are taking a more cautious approach. Daniel Pilling, a portfolio manager at Sands Capital, still sees plenty of risk in the AI trade, particularly because no one knows whatโs in store for the technology.
โWe manage it with a lot of humility in terms of what we can do and what we know,โ said Pilling. โBut net-net I would actually still say that maybe thereโs a sense of AI concern, I suppose, rather than sort of that bullishness that we had in May and June.โ
Such scepticism is plentiful and a sign that the market remains healthy, according to Tengler.
โWhat you donโt want is euphoria, which is what we had at the end of the โ90s,โ she said, referring to the dotcom bubble.
Investors will get the latest read on the outlook for AI spending this week when memory chip maker Micron Technology reports earnings on Wednesday after US markets close [early Thursday AEST].
One thing everyone seems to agree on is that rapid sentiment swings arenโt going away any time soon.
โItโs easy to focus on the destruction argument, and itโs equally easy to focus on the potential creation argument,โ said Bill Mann, chief investment strategist and portfolio manager at Motley Fool Asset Management, which has about $US2.7 billion in assets. โThatโs going to be our reality in the markets for a while.โ
Bloomberg
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