Tech stocks investors’ fears brew over the AI bubble and the negative weight of markets

US tariffs and recession risks are the most talked-about trends in global trade, but fears of a bubble in artificial intelligence (AI) and its potentially negative impact on the broader market, if it bursts, are a close second.

Per Bloomberg, the Nasdaq 100 Index posted its biggest quarterly drop in nearly three years on Monday, plunging 8.3%. The decline is troubling for tech investors, many of whom had placed their bets on AI-driven growth in data centers and computing infrastructure. 

Last week, a series of declines signaled the potential for a pullback in the massive flow of capital into this sector. These warnings set off a chain reaction, leading to a sharp decline in major tech stocks like Nvidia and Amazon, which had once been among the biggest drivers of market growth.

Tech stocks count losses in 2025 Q1

Shares in Nvidia, the chipmaking giant, have tumbled 28% since reaching a peak in January. Other tech giants like Microsoft, Amazon, Alphabet, and Meta have seen their stock prices fall by 20% or more. 

According to Michael Mullaney, director of global market research at Boston Partners, these stocks were initially “priced for perfection” and are now highly vulnerable because of the growing market uncertainty and tensions across the West and Europe. 

“That makes them an extremely obvious place for investors who are broadly nervous to take profits,” Mullaney explained.

Another economist, Kim Forrest, chief investment officer at Bokeh Capital Partners, told Bloomberg that what would have been a “feeding frenzy” in 2024 is now seen as “too many dollars chasing too little computing center demand.”

The IPO market is also not doing as well as most had expected, even with US President Trump’s “support.” CoreWeave, an Nvidia-backed cloud-computing provider, debuted last week with much fanfare but saw its stock falter by 10% at one point on Monday, its second day in the stock market.

Tariff woes on markets continue

The Trump administration is well on course to unveil new tariffs on April 2, and no one is arguably angrier at that than Wall Street. Investors have the gist of which countries will be affected by the levies, but no one, except the White House, knows the specifics of what goods they will have to balance out to alleviate some of the economic pressure. 

“The best way to summarize this trading environment is frustration and fatigue,” said Joe Gilbert, portfolio manager at Integrity Asset Management. His sentiment was reflected in the S&P 500 Index swinging wildly, dropping as much as 1.7% early in the session of Monday, but clawing back some losses during the day, closing up 0.6%. 

In the Tuesday pre-market trading period, the benchmark equities index was up 0.5% from yesterday’s close. Still, the S&P 500 is down 4.37% year-to-date, its worst quarter start since 2022.

The woes have forced analysts to adjust their forecasts for the broader market heading into the second quarter of 2025. Goldman Sachs lowered its year-end target for the S&P 500 to 5,700 from 6,200, citing their suppressed predictions to concerns about both the tariff issue and the global economic environment. 

This year’s market conditions are poles apart from the optimistic outlook many had at the start of the year. US stocks were riding high towards the end of 2024, buoyed by expectations of a continued pro-business environment under Trump.

Carley Garner, senior strategist and founder of DeCarley Trading, said that the market has shifted from “a mindset of focusing on greed and how much money can I make” to one centered on “how much money can I lose.” 

The change in investor sentiment has led to an uptick in demand for safer, recession-resistant stocks, with some traders opting to sell off more volatile positions in favor of the special metal gold, which has historically performed well during downturns.

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