Tech Stocks Tumble Amid AI Valuation Concerns: Market Reacts to AI's Growing Influence

U.S. stocks experienced declines as investors grappled with valuation concerns in the AI-driven tech sector. Heavy losses were seen in Advanced Micro Devices and Palantir, among others. The shift saw a rise in energy stocks, while some tech firms struggled due to fears of AI disruption in legacy software.

U.S. stocks concluded Wednesday's trading session on a lower note, influenced by notable downturns in major tech firms like Advanced Micro Devices and Palantir. Investor anxiety over high valuations signaled concerns that the AI surge on Wall Street may have hit its limit.

Alphabet, which initially dropped ahead of its quarterly results, rebounded post-closure with news of increased spending on AI, a field where the competition is heightening. Advanced Micro Devices saw a substantial 17% loss after projecting disappointing quarterly revenue, struggling against AI giant Nvidia.

Investors, wary of AI-related stocks, diverted focus to value companies outside the tech bubble. This shift led to gains in the S&P 500's value index, even as growth and tech indices declined. Meanwhile, the energy sector outperformed, buoyed by sustained demand for AI-optimized server infrastructure and increased capacity investments.

(With inputs from agencies.)