Concerns over the scale of capital expenditure on artificial intelligence by the industry’s biggest tech companies have seen trillions of dollars wiped off their combined market valuation.

Between its peak on 6 October and the end of the month, the Nasdaq 100 dropped by more than 9%. Estimates put the market value of these losses at around $5 trillion.

“For three years, tech giants only had to announce investment in artificial intelligence (AI) to be rewarded by the stock market,” Grégoire Kounowski, head of advisory at wealth manager Norman K. observed. “That is no longer the case. The third-quarter earnings season marks a turning point: investors now want to know when this spending will pay off, and how it will be financed.”

AI’s biggest names – especially hardware providers like Nvidia (NASDAQ:NVDA) – have seen surging profits and their market capitalisations boom as spending on AI infrastructure has soared.

But investors are becoming increasingly sceptical over the sustainability of these increased AI profits, and appear ready to penalise businesses that can’t demonstrate clear returns on their AI investments.

Has AI cannibalised Google Search?

The rout began when Google’s parent company Alphabet (NASDAQ:GOOGL) reported its results for Q3 of 2026 on 28 October. Diluted earnings per share (EPS) fell 26.1% year-on-year to $2.12 – well short of analyst forecasts of $3.02.

Although Google Search volumes reached record levels, revenue growth in the segment slowed to 12% from 17% in the previous quarter – suggesting that Google’s own AI overviews may be hurting its ability to monetise its core product.

Alphabet’s shares tumbled by 12.6% the following day and lost a further 1.4% on 30 October.

“Alphabet saw $463 billion wiped off its market value [in a single day],” said Dan Coatsworth, head of markets at wealth manager AJ Bell. “Alphabet’s results could go down in history as a major turning point in the AI story. They showed another quarter of cash burn and that AI summaries on search were affecting advertising revenue. The bear case many had dismissed is now becoming a reality.”

Alphabet was joined by Intel (NASDAQ:INTC) which fell by 28.6% on 30 October, following an alarmingly bleak forecast for Q4 accompanying its Q3 results the previous evening.

“The gigantic declines we’ve seen this week in shares such as Alphabet and Intel suggest that investor sentiment has been turned on its head,” said Coatsworth. “Current price action implies tech investors want to jump off the treadmill rather than slow it down.”

How do investors feel about AI?

The longevity of the AI stock market boom will largely depend on how the market sees the potential of the technology.

Research from the Association of Investment Companies (AIC), an industry body representing the UK’s investment trusts, indicates that investors are more negative than positive at present, despite recognising some of the technology’s long-term potential..

Based on a survey of 400 private investors and 200 intermediaries, the AIC found that misinformation (74%), job losses (73%) and loss of human skills (72%) are the top three concerns investors have about AI. Loss of privacy and increased pressure on water resources were also of concern to 51% and 45% of respondents, respectively.

“Given the apocalyptic warnings from AI companies themselves, it’s no surprise that investors are concerned about potential negative impacts of AI,” said Nick Britton, research director at the AIC. “We’ve also seen waves of AI-related job losses reported in the news, while actual or potential benefits of AI remain more distant and hypothetical for most people.

“As long as the AI investment boom continues and investors are making money, such fears may be overlooked,” Britton continued. “But if there is a market correction then AI companies may have to work harder to persuade investors that they can deliver growth while addressing their wider concerns.”

However, 68% said improved access to healthcare and medical breakthroughs was positive.

Will the AI boom recover, and should you invest?

This isn’t the first time that investor sentiment has led to AI selloffs over the last four years, and the market has recovered following every previous bout of pessimism.

Key to whether or not stocks recover will be upcoming earnings releases from the likes of Apple (NASDAQ:AAPL), Palantir (NASDAQ:PLTR) and Advanced Micro Devices (NASDAQ:AMD).

“What investors will want to see to avoid sell offs is a 'reasonable' amount of capital expenditure and growth beating expectations,” said Susannah Streeter, chief investment strategist at wealth manager Wealth Club. “That’s the sweet spot, growth without runaway spending.”

If you think the AI boom could recover then you could consider investing in an AI-focused exchange-traded fund (ETF), or an investment trust that focuses on technology such as the Allianz Technology Trust (LON:ATT) or Polar Capital Technology (LON:PCT).