Analysis-US tech-stock stumble shows vulnerability in AI trade

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profits during a seasonally difficult period for stocks. Friday's looming speech by Federal Reserve Chair Jerome Powell at the annual Jackson Hole symposium is creating caution, investors said, with the potential for volatility if his comments fail to meet growing market expectations that the central bank is poised to cut interest rates."When you have overcrowding and you have had such strong performance, it doesn't take much to see an unwind of that," said Keith Lerner, co-chief investment officer at Truist Advisory Services. "At the same time this week, everyone is waiting for the Fed, and there is repositioning ahead of that."The heavyweight S&P 500 tech sector fell sharply for a second consecutive session on Wednesday, putting its decline on the week at about 2.5%, while the tech-heavy Nasdaq Composite was off about 2% for the week. Shares of some highflyers, including Nvidia Corp and Palantir Technologies, were getting hit particularly hard.The pullback comes after a huge rally in which the tech sector soared over 50% through last week since the market's low for the year in April. That easily topped the 29% gain of the broader S&P 500 during that period and drove up valuations of tech stocks to lofty levels.Investors cited wariness about the artificial intelligence trade, which has been a key driver of tech stocks and the broader market as indexes have soared to record highs this year.Shares of Nvidia, the semiconductor giant that has symbolized the AI trade, have gained about 30% this year while shares of AI-focused data and analytics firm Palantir have roughly doubled year-to-date.Indeed, the tech sector's price-to-earnings ratio recently reached about 30 times expected earnings for the next 12 months, its highest level in a year, according to LSEG Datastream, while tech's share of the overall S&P 500's market value is nearly its highest since 2000.Recent cautionary signs included a study from researchers at the Massachusetts Institute of Technology that found that 95% of organizations are getting no return on AI investments, as well as comments by OpenAI CEO Sam Altman, who told tech news website the Verge last week that investors may be getting overexcited about AI.Terms and Privacy PolicyPrivacy & Cookie SettingsMore InfoS&P Futures6,388.75 +0.50 (+0.01%)Dow Futures44,901.00 +47.00 (+0.10%)Nasdaq Futures23,185.25 -34.50 (-0.15%)Russell 2000 Futures2,286.60 +6.00 (+0.26%)VIX16.76 +0.16 (+0.96%)Gold3,369.00 -12.60 (-0.37%)PortfolioSign in to access your portfolioSign inTop gainersXPEV XPeng Inc. 22.75 +2.38 (+11.68%)TLX Telix Pharmaceuticals Limited 12.09 +1.12 (+10.21%)YMM Full Truck Alliance Co. Ltd. 12.09 +1.08 (+9.81%)NIO NIO Inc. 5.54 +0.47 (+9.27%)AEG Aegon Ltd. 8.03 +0.57 (+7.64%)Top losersHSAI Hesai Group 23.06 -2.85 (-11.00%)BMNR Bitmine Immersion Technologies, Inc. 47.73 -4.33 (-8.32%)WW WW International, Inc. 31.01 -2.48 (-7.41%)STEM Stem, Inc. 15.29 -1.18 (-7.16%)CVI CVR Energy, Inc. 26.84 -2.05 (-7.10%)Most activeOPEN Opendoor Technologies Inc. 3.6000 +0.3800 (+11.80%)NIO NIO Inc. 5.54 +0.47 (+9.27%)NVDA NVIDIA Corporation 174.98 -0.42 (-0.24%)INTC Intel Corporation 23.50 -0.04 (-0.17%)PLTR Palantir Technologies Inc. 156.18 +0.17 (+0.11%)Earnings eventsTrending tickersNIO NIO Inc. 5.54 +0.47 (+9.27%)CBRL Cracker Barrel Old Country Store, Inc. 54.80 -4.22 (-7.15%)ZM Zoom Communications Inc. 73.17 +1.01 (+1.40%)INTU Intuit Inc. 697.76 -1.39 (-0.20%)WDAY Workday, Inc. 227.58 +0.09 (+0.04%)Top economic events