Nvidia, Microsoft and AI stocks fall on spending fears

The concern is not that AI is fake, but that valuations and infrastructure buildout have raced ahead of monetization. ChatGPT compared the setup to the dot-com era, where a real technological breakthrough still produced a painful correction when investor enthusiasm outran business results, while Gemini pointed to the same classic warning signs: overbuilt infrastructure, circular spending and compressed expectations.

That tension is showing up in price action. Nvidia closed at $204.64 on Oct. 30, down from $235.20 in mid-May, while Microsoft fell to $521.91 from $531.01 two days earlier and the S&P 500 slid to 755.72 from 772.31. Nvidia’s share price is now below its 50-day moving average, with its 14-day RSI at 31.0, a level that suggests oversold conditions after the latest drop, while Microsoft has also slipped under its 50-day average as momentum cools.

The anxiety is broader than equity traders. Adalytica’s AI sentiment gauge shows “Extreme Fear,” with sentiment at 4, down 96 points over 30 days, while Nvidia’s earnings sentiment sits at 14, also in “Extreme Fear.” That kind of sharp deterioration suggests investors are no longer just debating whether AI is overhyped — they are starting to price in the risk that spending could outpace returns well into 2027.

For investors, the key question is whether hyperscalers can turn their massive AI outlays into durable cash flow before financing conditions tighten or growth slows. Perplexity said the real danger would come from a combination of disappointing earnings, spending cuts and credit stress, while ChatGPT warned that the worst-case reckoning would be a gap between revenue and infrastructure spending.

If that gap narrows, the AI trade can keep running. If it widens, the sector’s biggest names could face a valuation reset even if the technology itself keeps improving.