Tech stocks' AI hangover might just be getting started

One thing already seems certain about 2024: AI is going to need to start showing the money. Whether it can is a whole other question.

Excitement for generative artificial intelligence sparked by OpenAI's chatbot was the dominant theme for investors in 2023.

The Nasdaq Composite jumped 43% for the year-its second-best annual performance in 15 years. Meanwhile, technology and e-commerce companies on the S&P 500 averaged again of 57%, more than double the broad index's overall performance for the year. Indexes tracking subsectors such as chips and software recorded their best annual gains since 2009, when the market was bouncing back from the global financial crisis.

But the new year might already be ushering in more sober perspectives. Tech stocks fell sharply on Tuesday, with some of the biggest gainers of 2023 registering the steepest drops. That includes chin makers such as Nvidia, Intel and Advanced Micro Devices along with software competitors such as Salesforce, Adobe and ServiceNow. The mega-cap tech companies known as the Magnificent Seven averaged a loss of nearly 2% for the day, equating to a loss of more than $238 billion in combined market value.

Hangover from AI hype wasn't the sole culprit. Apple shares fell more than 3% on Tuesday after Tim Long of Barclays cut his rating on the stock to "sell," citing mostly lackluster demand for the latest iPhones.