AI Stock Valuations Under Scrutiny as Tech Growth Slows
Investors are reevaluating the lofty valuations of AI-linked stocks as slowing growth rattles the tech sector. Three years after ChatGPT ignited the AI boom, the market now grapples with a trifecta of concerns: ballooning expenditures, decelerating growth rates, and widening gaps between HYPE and fundamental performance.
The recent pullback in Nvidia, Oracle's sharp decline following heavy AI investments, and waning sentiment around OpenAI-affiliated companies underscore mounting tensions. As 2026 approaches, the central debate revolves around whether capital should retreat preemptively or ride out potential late-cycle gains.
"We've reached the inflection point where expectations collide with operational reality," said Jim Morrow of Callodine Capital Management. "The narrative remains compelling, but we're now betting on whether ROI will materialize."
Key uncertainties include adoption hurdles, infrastructure costs, and monetization challenges. These factors will dictate the next market phase. The S&P 500's $30 trillion expansion since 2023 has relied disproportionately on tech titans like Alphabet and Microsoft—any slowdown could Ripple across indices.
"Corrections occur not when growth decelerates, but when acceleration plateaus," noted Sameer Bhasin of Value Point Capital. The sector faces a critical test as OpenAI plans $1.4 trillion in expenditures against uncertain revenue streams, with reports suggesting $115 million in potential quarterly burns.
