Some tech shares are plunging – what does that mean for the AI revolution?

The euphoria for this technology has boosted the value of some world’s biggest companies even as they spend hundreds of billions of dollars on the building blocks of the technology.

But over the last few weeks, the value of some of the companies that make those building blocks has plummeted – prompting some to question whether what some have dubbed “the AI bubble” is about to burst.

Some of the sharpest falls have been in Asia, with shares in Korean chip makers such as SK Hynix and Samsung down 46% and 35% respectively over the last month as investors worry the recent boom in demand for the chips that power AI is unsustainable.

Yet these shares still are up threefold and fivefold respectively over the last year, leading many to conclude that some caution and profit taking after such massive gains was inevitable – and indeed healthy.

The South Korean stock market is notoriously volatile, but concerns have spilled over into the big US companies.

Shares in Google and Tesla plunged briefly before recovering last week after both firms pledged to spend billions more on AI in the months and years to come despite so far it losing them money.

And with other big names such as Meta, Microsoft and Amazon reporting their latest financial results this week, investors have the opportunity to scrutinise just how much these companies are now betting on AI.

On Wednesday, the tech-heavy Nasdaq ended the trading day about 9% below its June record high, driven down in part by worries over heavy AI spending.

“There is still a healthy degree of scepticism about the ability of these investments to generate a commensurate level of return,” Russ Mould, an investment director at AJ Bell, said.

But according to leading tech investor Eileen Burbidge despite the concerns there’s not yet a serious reckoning.

“The AI bubble hasn’t burst but it’s letting out air,” she told the BBC.