AI Costs: Tech Market Value Falls on AI Costs and Recession Fears

The market value of big tech companies fell in August on concerns about rising artificial intelligence infrastructure costs and growing recession risks, which could make these stocks particularly vulnerable to a market correction.

Alphabet Inc. shed 4.7% of its market value last month as a slowdown in YouTube ad sales sparked profit worries. A U.S. judge’s ruling that Google violated antitrust laws and the emergence of new competition from OpenAI, which is developing a prototype for an artificial intelligence search engine, also helped push the stock lower.

Amazon.com Inc.’s market value fell 4.5% on a decline in online sales.

Tesla’s market capitalization fell 7.7% last month on weaker second-quarter financial results and after Canada plans to impose a new 100% tariff on electric vehicles made in China.

The world’s most valuable automaker began shipping Shanghai-made electric vehicles to Canada last year, and Ottawa’s plans have raised concerns about the potential impact on export profits from its more expensive U.S. manufacturing base.

Meanwhile, Nvidia’s market value fell 7.7% to $2.92 trillion in the last week of August after third-quarter gross margin was forecast to fall short of market estimates and revenue fell short of expectations, disappointing investors who had expected better results.

Nvidia, which controls more than 80% of the AI ​​chip market, is uniquely positioned as the biggest enabler and beneficiary of the AI ​​boom. On a positive note, U.S. drugmaker Eli Lilly’s market value has jumped nearly 20%, making it the market leader, driven by solid sales and the launch of a weight-loss drug that significantly reduces the risk of developing type 2 diabetes in overweight adults.

Berkshire Hathaway’s market value topped $1 trillion for the first time at the end of August, reflecting investor confidence in the conglomerate that Warren Buffett built over nearly six decades to become what many consider a benchmark for the U.S. economy.

Meta’s market value also rose nearly 10% after the company beat market expectations for second-quarter revenue and forecast strong revenue growth in the July-September quarter, indicating that heavy digital ad spending on its platforms could offset the cost of investing in artificial intelligence.