Global investor sentiment towards AI remains positive despite a massive sell-off in tech stocks. Markets in Europe, Asia and the US recorded continued losses as AI stocks such as Nvidia and Palantir were weighed down by concerns of overvaluation.
Investment analysts said the decline was more of an AI sector correction and not the start of a new correction phase. Analysts also stressed that the global market has been waiting for a major correction for a long time, but the current pressure is not deep enough to trigger a structural change.
The main focus is now on Nvidia's earnings report, which is expected to influence market sentiment. Analysts such as Morgan Stanley's Mike Wilson believe that the current decline is part of an AI mid-cycle correction, with debt financing for AI infrastructure just beginning.
Investors are also assessing risks surrounding overinvestment by hyperscalers such as Alphabet and Meta, which are now spending up to 70% of cash flow on capex, especially data centers. Bank of America reported its first concern in 20 years that hyperscalers may be investing too aggressively.
While AI remains a key investment theme, analysts warn that current valuations reflect a best-case scenario, and the market is adjusting expectations to actual risks. However, buying opportunities at low prices are still open for long-term investors, some analysts said.
