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Is this the beginning of the end of the AI stock market boom?
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- DeepHorus
The Nasdaq 100 fell 5.5% last week, fuelling fears that the AI stock market boom may be faltering. The decline followed the failure of Australian datacentre company Firmus to list on the ASX. Its multi-billion-dollar IPO had been expected to value Firmus above Telstra. Tech stocks rebounded on Monday night.
Firmus’s aborted listing prompted investors to reconsider similar businesses. The Nasdaq 100 remains nearly three times higher than at the start of 2023. The "magnificent seven" tech giants now account for 35% of the S&P 500, up from 12% a decade ago, with their combined market value up over 50% in two years.
Gerard Minack of Minack Advisors said investors are overestimating AI returns. He said he has "no confidence calling the precise top of the AI market." Raisah Rasid of JP Morgan Asset Management described the sell-off as "a valuation reset, rather than the market questioning the efficacy of AI itself."
Rasid cited two threats: an open-source AI model, possibly from China, could undermine AI economics, and popular opposition could gain critical mass. Sally Auld, NAB’s chief economist, said the pullback looked like investors taking a breath. "Every big new technology, from railroads to the internet, we always overbuild capacity," she said.
Investors are also mindful of tech companies’ growing reliance on debt. Amazon, Microsoft, Google and Apple have borrowed heavily for datacentres and AI infrastructure. Hyperscalers spent $US425 billion in AI capital expenditure in 2025, Minack said, and are on track for $US800 billion this year and over $US1.1 trillion next.
The imminent quarterly earnings season will deliver a verdict on AI valuations. Minack warned sharemarkets can climb well after earnings warnings emerge. The recent action may signal a reassessment rather than the end of the AI boom.
