A major tech selloff is rattling Wall Street as the vast gap between AI company valuations and their underperforming revenues continues to widen. According to the Wall Street Journal, the stock market is showing clear signs of “fragility, ” with Nvidia dropping seven percent last week. Even with optimism sparked by signs of an end to the ongoing federal shutdown, the AI chipmaker’s slide persisted this week, falling another three percent on Tuesday. Meta’s shares have also declined nearly 17 percent since its quarterly earnings report late last month, despite the company surpassing investor expectations. Similarly, AI software giant Palantir has experienced an eight percent drop since posting better-than-expected results early last week. In short, a dark cloud looms over the AI sector, where lofty promises of vast capabilities continuously seem distant, and investors are growing increasingly hesitant about the astronomical expenditures on AI infrastructure. Concerns are mounting that the billions being poured into data center expansions may never yield the promised returns. Tech leaders are openly discussing an AI bubble that, if burst, could plunge the U. S.

into a deep recession, economists warn. Adding to the uncertainty, Japanese firm SoftBank revealed this week it had sold its Nvidia stake for $5. 8 billion—funds quickly redirected to other AI investments, including major stakes in OpenAI. SoftBank’s shares tumbled as much as ten percent on Tuesday amid worries that the company was forced to sell off assets to meet surging funding demands. In an apparent effort to reassure anxious investors, SoftBank Vision Fund CFO Navneet Govil asserted that the AI frenzy would not result in disaster. “What differentiates today from the dotcom boom is that AI companies are generating meaningful revenues, ” he told reporters, according to Reuters. “There’s much discussion about capital expenditure, but it’s actually driven by demand. ” Meanwhile, Michael Burry, known for shorting the US housing market before its 2008 collapse, added tension by betting over $1 billion last week that the share prices of Nvidia and Palantir will fall, further fueling fears. Companies are already incurring billions in losses as revenues lag significantly. While privately held OpenAI remains tight-lipped, the Sam Altman-led company plans to spend $1. 4 trillion over the next eight years, despite currently generating about $20 billion annually as it seeks a viable business model. However, whether the recent stock selloff signals an imminent crash remains uncertain. Investors continue to funnel billions into AI, with firms announcing billion-dollar deals and plans for vast data center projects. This is despite the absence of a “clear financial model for profitable AI, ” as the WSJ notes — a huge gamble that has once optimistic investors growing increasingly cautious.