AI has experienced a course correction... not a crash

Wall Street investors have begun to run out of patience with the hype but James Moore says there’s no need to panic yet

- James Moore

If you’ve been around markets for any length of time, the herd mentality at play never fails to raise a chuckle. A case in point: the tech sector losing the contents of its stomach overnight on Wednesday, driven by something any reasonably competent AI could probably have predicted. You couldn’t make it up.

Some facts: the Nasdaq Composite lost 3.6 per cent of its value and the more broadly based S&P 500 fell 2.3 per cent, the worst declines they have posted since 2022. Even the Dow – which is not a proper stock market index but still gets quoted all over the place – couldn’t avoid getting sucked in, shedding 1.3 per cent.

If those numbers don’t look all that exciting, consider that in actual dollar terms, what went on last night (if you’re of the European persuasion) represents a $1 trillion (£780bn) shellacking. That’s an awful lot of value getting vaporised. The herd had piled into tech, hugely overexcited by all the AI hype and the gaudy promises made by its leading exponents. The herd is now running because they haven’t (yet) delivered on those. Nor does it look like that will happen any time soon.