Wall Street Retreats as AI Enthusiasm cools Following Microsoft’s Massive Investment
NEW YORK – Stock markets experienced a downturn Friday,fueled by growing caution surrounding the rapid advancement of artificial intelligence (AI) and a reassessment of valuations within the technology sector. The Nasdaq 100 fell nearly 4%, marking its worst weekly performance as April.
The shift in sentiment comes as Microsoft revealed it allocated approximately $34.9 billion to AI investments during its first fiscal quarter – significantly exceeding the $30.34 billion estimated by Visible Alpha. While the company’s Azure cloud business,a key unit linked to AI,grew by 40% between July and September (above the anticipated 38.4%), the ample capital expenditure overshadowed the gains.
Microsoft’s overall revenue increased by 18% to $77.7 billion, surpassing projections of $75.33 billion,according to LSEG data. However, the market is now grappling with concerns about the sustainability of the AI-driven stock rally, citing high valuations and a lack of concrete evidence demonstrating tangible productivity improvements.
The news also follows a clarification of Microsoft’s partnership with OpenAI, securing a 27% stake in the AI firm valued at nearly $135 billion, along with a share of sales and access to intellectual property. OpenAI’s ChatGPT technology has been instrumental in Azure’s recent expansion and intensified competition with Amazon.com in the cloud computing market.
Notably, Apple Inc., with a less aggressive AI strategy, bucked the trend, advancing 0.9% on Friday and serving as a relative safe haven during the broader tech decline.
