A string of disappointing earnings reports from America’s largest technology companies has triggered sharp stock declines and growing warnings that an overvalued AI and chip investment pyramid could collapse, dragging global markets into crisis.
Alphabet, the parent of Google, reported revenue growth of roughly 24 percent, bringing quarterly revenue to $119 billion, but its AI infrastructure spending climbed to between $195 billion and $205 billion. The report sent Alphabet shares down 7 percent, and they were trading about 15 percent below their May peak as of the end of July. Tesla shed 17.8 percent of its market capitalisation after its own report, and Microsoft shares fell to annual lows following results released on July 29.
Meta and Amazon fared somewhat better, according to the source, because advertising revenue and cloud services helped offset heavy AI investment costs. Apple, which largely avoided the AI spending race and continued selling smartphones at large brand premiums, was in the strongest financial position among the group.
Nvidia, the chipmaker whose dramatic rise helped ignite the broader technology rally, lost 12 percent from its peak valuations, a decline the source calculates at roughly $180 billion. Memory chip maker Sandisk fell 48 percent in a single month.
Analysts See Overvaluation, Not Just Volatility
Dmytro Churin, a financial analyst at EAVEX Capital, told the Ukrainian news agency UNIAN that the situation was a predictable consequence of excess. He said technology sector stocks had been trading significantly above their fair fundamental value, making a correction a natural outcome, and that the broader stock market had been highly speculative for the past two years.
Yaroslav Romanchuk, president of the International Institute of Freedom and an economic expert, described investors as deeply divided. He said one camp points to trillion-dollar market capitalisations as proof of health, while the other argues the investment boom is approaching its limit. He noted that defenders of current valuations often claim that old metrics no longer apply to new-economy corporations, an argument he appeared to view with scepticism.
Romanchuk said hedge funds should be watched as an indicator of where markets are heading, because they act as a form of financial intelligence and are first to price in future returns. He said their current selling activity, even during the traditionally quiet summer period, could be an early warning signal. He predicted that autumn would be very turbulent for equity markets, with the threat of a genuine collapse in US markets followed by world markets.
Financial analyst Andriy Shevchyshyn confirmed that large funds had sharply reduced their activity, describing it as a historically record sell-off of technology giant stocks. He said investors were questioning why so much capital had flowed into the sector when Chinese competitors could produce cheaper alternatives relatively quickly.
Where Money Is Moving
Shevchyshyn said hedge funds and professional investors were shifting attention toward the physical infrastructure that underpins the technology revolution rather than the software and chip companies themselves. He cited electricity supply, natural gas for powering data centres, water for cooling, and silicon mining as areas of interest, pointing to equipment manufacturers such as Caterpillar as beneficiaries of rising demand. Investors were also moving toward defensive consumer stocks, naming Procter and Gamble, Pfizer, and Coca-Cola as examples, as well as utilities and real estate companies.
Both Romanchuk and Shevchyshyn pointed to Warren Buffett as a significant market signal. Shevchyshyn said Buffett had been sitting on cash for more than a year, having exited equities in favour of bonds and low-risk assets while waiting for an overheated market to turn. Romanchuk added that Buffett was holding between $350 billion and $400 billion in cash and was not recommending investment anywhere in the current environment. His advice, according to Romanchuk, was to move capital out of equities into government bonds and gold and to build diversified positions in defensive assets to weather the turbulence.
Shevchyshyn noted that yields on US government bonds had already jumped to their highest levels, with ten-year Treasuries reaching 4.64 percent and one-year notes at 4.09 percent, a sign that investors are rotating out of stocks and into safer instruments. He said investors were also nervous about the Federal Reserve raising interest rates, though he judged a hike unlikely before the US Congressional elections and more probable toward the end of the year.
Global Exposure
Romanchuk described the instability as global. He said short-term capital was already leaving US assets but was not moving into Asia, citing large corporate and state debts in China along with an overproduction crisis as obstacles. Japan, South Korea, and Taiwan were also dealing with debt problems and weak growth dynamics, he said, while Europe faced a competitiveness crisis, with European investors having placed heavy bets on the same group of US technology stocks now under pressure.
On European defence stocks, which had surged in recent years, Shevchyshyn said companies such as Rheinmetall were already at their peak and the intense demand had passed. Romanchuk noted that defence sector growth of 200 to 300 percent annually was not large enough to absorb the capital that would leave the chip and AI segment if a major correction occurred.
Shevchyshyn said his base expectation was a market correction of around 9 percent, with a correction of 15 to 20 percent also plausible given geopolitical instability, and that the full picture for the technology segment would become clearer within about 20 days once the earnings season concluded. Romanchuk forecast a deeper fall in autumn when multiple negative factors converged simultaneously. He said some estimates pointed to a market decline of as much as 40 percent from current levels, a loss he described as tens of trillions of dollars.
Churin advised investors to hold only a portion of their capital in equities, and to maintain diversified portfolios that include bonds, multiple currencies, real estate, and stocks across different industries.
