{"id":162410,"date":"2025-08-21T00:15:15","date_gmt":"2025-08-21T00:15:15","guid":{"rendered":"https:\/\/www.europesays.com\/us\/162410\/"},"modified":"2025-08-21T00:15:15","modified_gmt":"2025-08-21T00:15:15","slug":"ai-anxiety-has-sent-markets-into-a-tizzy-but-experts-say-the-jitters-will-only-punish-those-chasing-the-froth","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/us\/162410\/","title":{"rendered":"AI anxiety has sent markets into a tizzy, but experts say the jitters will only \u2018punish those chasing the froth\u2019"},"content":{"rendered":"

Major technology stocks tied to artificial intelligence took a sharp downward turn<\/a> Tuesday, rattling markets and raising concerns the sector\u2019s billion-dollar promises may not be bearing fruit as quickly as hoped. <\/p>\n

Shares of Palantir Technologies<\/a>, the data-analytics firm widely viewed as an AI bellwether, plunged more than 9%, its worst tumble since March, after prominent short-seller Andrew Left of Citron Research renewed his bearish stance<\/a>. Other major names felt similar shocks, highlighting underlying investor doubts: Oracle<\/a>, in the midst of aggressive AI investments and a strategic pivot that included mass layoffs in its cloud division, saw its shares drop nearly 6%. Chipmakers integral to the AI boom struggled as well: Advanced Micro Devices<\/a> fell 5.4%, Arm Holdings lost 5%, and Nvidia<\/a>, the sector\u2019s dominant force, slid 3.5%.<\/p>\n

SoftBank, whose outsize bets on AI have defined its recent strategy, dropped more than 7%\u2014amplifying concerns about a broader tech correction and underscoring Wall Street\u2019s uneasy relationship with the so-called next big thing. OpenAI CEO Sam Altman even admitted AI is in a bubble<\/a>.<\/p>\n

The abrupt selloff echoes broader skepticism about the sustainability of sky-high valuations seen in AI-focused companies. But experts say that while investors are right to be cautious, the underlying technology isn\u2019t going away\u2014and this is a short-term drop during a long-term transformation.<\/p>\n

What\u2019s causing the current AI anxiety<\/p>\n

Behind the market jitters, a recent report from MIT<\/a> said approximately 95% of company generative AI pilot programs resulted in \u201clittle to no measurable impact\u201d on revenue or profits. While a handful of startups have thrived, the vast majority of corporate efforts have stalled, caught in flawed enterprise integrations and learning gaps. The research, encompassing 150 executive interviews, 350 employee surveys, and an analysis of 300 public AI deployments, paints a sobering picture: Outside exceptional cases, generative AI projects have yet to justify the vast spending across the sector.<\/p>\n

MIT\u2019s lead author, Aditya Challapally, told Fortune<\/a> failure may lie less in the underlying tools than in enterprise execution, citing issues around workflow adaptation and resource allocation. In contrast, nimble startups have rapidly scaled revenues\u2014validating the potential of the technology when well integrated, but also highlighting a gulf between hype and reality for larger companies.<\/p>\n

\u201cThere\u2019s no doubt that when MIT reports a 95% failure rate in AI pilot programs, it\u2019s alarming,\u201d Mike Sinoway, CEO of AI-powered search software company Lucidworks<\/a>, told Fortune. \u201cBut the problem has less to do with the underlying technology and more with how companies are approaching it.<\/p>\n

\u201cIn our own research, polling over 1,600 AI practitioners and leaders and validating this with bot analysis, we found 65% of teams are rolling out AI without the fundamental tech infrastructure in place,\u201d he said. \u201cTrying to build cutting-edge applications atop weak foundations is like building an F1 car on a go-kart engine\u2014you simply won\u2019t get results. So while a 95% failure rate might seem like a sign of a bubble, once organizations focus more on what AI actually needs to succeed, we\u2019ll begin to see the traction everyone is expecting.\u201d<\/p>\n

Chase Feiger, CEO of Ostro<\/a>, an AI-powered platform for life sciences brands, agreed current volatility is part of a typical tech cycle. \u201cTalk of an AI bubble isn\u2019t new,\u201d Feiger told Fortune.<\/p>\n

\u201cEvery major tech shift goes through a stage where hype runs ahead of business fundamentals,\u201d he said. \u201cSome companies are burning money on inference costs, offering \u2018all-you-can-eat\u2019 models that cost thousands to run but bring in only hundreds in revenue\u2014a pattern reminiscent of Uber\u2019s early years. That overinflation explains market caution, but the underlying technology isn\u2019t overhyped. In health care, for example, AI is transforming drug development, patient care, and physician decision-making.<\/p>\n

\u201cThe correction will come. But over the long haul, the winners will be those who prove AI delivers durable value in complex, high-stakes environments,\u201d Feiger added.<\/p>\n

Short-term froth, long-term transformation<\/p>\n

Harvard professor Christina Inge<\/a> told Fortune the duality at work is nothing new. <\/p>\n

\u201cInvestors are right to be cautious,\u201d she said. \u201cNot every company claiming to be \u2018AI-driven\u2019 is creating real value; a lot of it is smoke and mirrors, with some tools amounting to incremental improvements on non-AI tech. Correction is inevitable, as history shows.<\/p>\n

\u201cBut the technology isn\u2019t going away. AI is already making a difference in health care, marketing, logistics, and finance. And we\u2019re only scratching the surface. In the long run, I expect the impact of AI to rival the Industrial Revolution. There\u2019s a lot of froth in the market right now, but the bigger story is just beginning. In other words: short-term bubble, long-term transformation.\u201d<\/p>\n

That view is echoed by Shay Boloor, chief market strategist at Futurum Equities<\/a>. <\/p>\n

\u201cWhat we\u2019re seeing isn\u2019t a bubble, but the foundation of a new economy,\u201d Boloor told Fortune. \u201cThere will be volatility\u2014inevitable with a sector this hot\u2014but the fundamental reality is every industry will be transformed by AI. Just look at Microsoft<\/a> and Meta<\/a> this quarter: Azure hit its biggest revenue numbers ever, Microsoft Cloud crossed $46 billion, and Meta monetized not just attention but intelligence, with 22% revenue growth and 38% profit growth, while spending $70 billion in capex. The demand is not hypothetical\u2014it\u2019s scaling now.<\/p>\n

\u201cWe\u2019re not at the peak of AI. We\u2019re at an inflection point.\u201d<\/p>\n

Separating winners from pretenders<\/p>\n

Siamak Freydoonnejad, cofounder of Sprites AI<\/a>, which makes an AI-powered marketing agent, says, however, deciding whether or not we\u2019re in an AI bubble \u201cmisses the point\u201d entirely.<\/p>\n

\u201cStock prices may have outpaced fundamentals, but inside enterprises, AI is already infrastructure,\u201d Freydoonnejad told Fortune.<\/p>\n

\u201cNo one who\u2019s seen campaign launch speed improve by 70% is going back to the old way,\u201d he said. \u201cSome vendors did slap \u2018AI\u2019 on legacy products to cash in, but those valuations will be corrected\u2014and deservedly so. What matters is which firms are using AI not as a shallow trend but as the basis for their entire product. Real efficiency gains are showing up for companies embedding AI deeply in their workflows. The market is about to sort out those with substantive results from those selling only promises.\u201d<\/p>\n

Omar Kouhlani, CEO of Runmic<\/a>, which uses AI to design revenue strategies for sales teams, told Fortune infrastructure spending reveals the true momentum. <\/p>\n

\u201cBig Tech just raised AI spending guidance to $360 billion\u2013plus for 2025, up sharply from previous estimates. I watch those numbers more closely than day-to-day share price changes,\u201d he said.<\/p>\n

\u201cThis isn\u2019t a rejection of AI, it\u2019s a market becoming more selective,\u201d Kouhlani continued. \u201cThe crash is separating real AI revenues from companies that only have AI PowerPoints. We\u2019re not in another dotcom bust. The infrastructure is being built now, and expectations are adjusting faster than the technology itself.\u201d<\/p>\n

Usha Haley<\/a>, the W. Frank Barton Distinguished Chair in International Business and professor of management at the Barton School of Business at Wichita State University, argues that cycles of bubbles and corrections are intrinsic to tech revolutions. \u201cHistorically, every breakthrough technology comes with bubbles,\u201d Haley told Fortune. \u201cAI is already delivering productivity gains, even as it erodes some jobs. We\u2019ll see some correction and consolidation, but not a collapse. The strongest players will emerge into a changed landscape. Regulation and stochastic shocks could alter outcomes, but competitive environments\u2014not monopolies\u2014will point to future leaders.\u201d<\/p>\n

Fabian Stephany<\/a>, a lecturer at the University of Oxford, sees evidence for both sides: \u201cTo some extent, yes, there is an AI bubble. But long-term fundamentals are exceptionally strong,\u201d he told Fortune. \u201cMany firms use AI for marketing more than substance, which has inflated valuations. Yet stock-market gains this year are overwhelmingly linked to real advances in AI at companies like Nvidia, Meta, Microsoft, and Broadcom<\/a>. Nvidia alone accounts for 26% of the S&P\u2019s advance, underscoring real market transformation.\u201d<\/p>\n

David Brudenell<\/a>, executive director at Decidr<\/a>, which builds an AI-powered operating system for businesses to automate workflows, told Fortune that \u201ccorrection is necessary\u201d as it \u201cseparates speculation from structural value.\u201d And David Russell<\/a>, global head of market strategy at TradeStation, agreed: \u201cPullbacks are normal after rallies stall.<\/p>\n

\u201cMajor players like Palantir and Microsoft failed to hold breakouts after strong earnings. That\u2019s a sign the good news may be priced in,\u201d Russell told Fortune. \u201cMarkets move ahead of fundamentals, but excessive prices punish those chasing the froth. In the weeks ahead, sentiment could shift to other macro factors.\u201d<\/p>\n

The expert consensus is clear: While stocks have pulled back, the fundamentals behind AI remain strong. Most believe the recent rout is an overdue market sorting\u2014separating hype from reality, speculation from enduring value. Even MIT\u2019s cautious findings are seen as a spur rather than a death knell.<\/p>\n

Now, all eyes will turn to Nvidia, which reports quarterly earnings next week. But broadly speaking, what the market is experiencing isn\u2019t a sign of crisis, but a marker of growing pains.<\/p>\n

For this story,\u00a0Fortune\u00a0used generative AI to help with an initial draft. An editor verified the accuracy of the information before publishing.\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"Major technology stocks tied to artificial intelligence took a sharp downward turn Tuesday, rattling markets and raising concerns…\n","protected":false},"author":3,"featured_media":162411,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[738,40144,64,26274,135,1671,20858,18582,37615,67,132,68],"class_list":{"0":"post-162410","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-markets","8":"tag-artificial-intelligence","9":"tag-bubble","10":"tag-business","11":"tag-fortune-intelligence","12":"tag-markets","13":"tag-nvidia","14":"tag-oracle","15":"tag-palantir","16":"tag-softbank","17":"tag-united-states","18":"tag-unitedstates","19":"tag-us"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115063876742080897","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/162410","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=162410"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/162410\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/162411"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=162410"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=162410"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=162410"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}