Tech Stocks Plunge: US Stock Market Faces AI Bubble Risk

The US stock market witnessed a sharp decline in key indexes on November 6 (ending early morning on November 7, Vietnam time), reflecting investors' concerns about technology valuations, monetary policy prospects and stagnant economic data. AI stocks, which have been considered the main driving force behind the market's strong growth in recent times, have undergone a sharp correction, warning that the foundation of the US stock market is increasingly dependent on technology companies.

AI Stocks' Swing Shows US Market's Reliance on Tech

The S&P 500 closed down 1.1% at 6,720.32, while the Dow Jones Industrial Average fell 0.8% to 46,912.30. The Nasdaq Composite dropped a steeper 1.9% to 23,053.99. The decline was driven largely by tech stocks, especially AI stocks, which dragged down the broader stock market.

The declines in DoorDash and CarMax shares are clear signs of concerns about the growth prospects of tech companies. DoorDash warned it would spend more on product development next year, while CarMax said its earnings forecast would be significantly lower than analysts expected. While major indexes recovered somewhat on Wednesday, weakness in tech stocks continued to weigh on the market.

Investors are concerned that the heavy weighting of tech in major indexes is making the market vulnerable. The tech sector now accounts for about 36% of the S&P 500, a level far higher than during the dot-com bubble 25 years ago. In addition, large companies such as Alphabet (Google), Amazon, Tesla and Meta Platforms have helped boost tech’s weighting to nearly half of the entire S&P 500.

A significant portion of the S&P 500 is tied to a single sector and theme, and if there is a downturn in AI, that could become a risk to the broader market, said Walter Todd, chief investment officer at Greenwood Capital.

While major AI companies like Palantir Technologies and Nvidia are under severe downward pressure, investors are also concerned about a possible “AI bubble” in the stock market. The sector has fallen more than 3% over the past week, led by weakness in AI-related stocks. While the correction may be a healthy step back, it also reminds investors of the potential dangers of over-reliance on a single technology sector.

Experts at Morgan Stanley and Goldman Sachs have both warned that the stock market could be headed for a recession, with tech valuations at high levels. The S&P 500's forward price-to-earnings ratio is now 23 times, well above its 10-year average of 18.8, according to LSEG Datastream. The tech sector's P/E ratio is also well above its 10-year average.

Despite the decline over the past week, technology was the best-performing of the 11 S&P 500 sectors, rising about 27%, compared with a 15% gain for the broader S&P 500. The technology sector has been a strong performer over the past three years and is now the largest sector in the S&P 500.

“If tech stocks fall for a sustained period, the broader market indexes will also be affected,” said Matt Maley, chief market strategist at Miller Tabak.

Tech stocks have been a big driver of the market's gains and their large weighting in major indexes. Tech companies are expected to account for about 25% of total S&P 500 earnings in the third quarter of 2025, underscoring the sector's financial strength.

Scott Wren, chief market strategist at Wells Fargo, said that AI leaders have strong cash flows, which are helping to sustain the market’s growth. “The big AI companies have real cash flows, and that’s a big driver of the stock market,” Wren said.

However, given the recent volatility, experts say investors need to be cautious. While there are positive factors, risks of overvaluation and uncertain macro factors could weigh on the market.

While the market has been in a sharp correction, many experts still believe that this could be a buying opportunity in a correction. JPMorgan Chase & Co. recommends investors “buy the correction,” predicting that the S&P 500 could surpass 7,000 in the near future. However, if economic data continues to deteriorate or central banks have to tighten monetary policy, the correction pressure could persist.

The November 6 trading session was a reminder that while the US stock market remains bullish, its heavy reliance on technology and AI can pose potential risks. Investors should closely monitor developments in the technology industry and macro factors affecting the global economy.

Source: https://thoibaonganhang.vn/co-phieu-cong-nghe-sut-giam-manh-thi-truong-chung-khoan-my-doi-mat-voi-rui-ro-bong-bong-ai-173210.html