Viewpoint: AI Stock Plunge Stems from Market Confusing Technological Prospects with Investment Returns

Odaily reports: David Allen, head of long-short strategy at Plato Investment Management, said the root cause of Thursday's market sell-off lies in investors conflating AI's transformative potential with whether related investments can deliver returns. The Nasdaq 100 index plunged as investors rushed to sell off US tech stocks amid speculation that congressional Democrats will tighten regulation of the AI industry. "There has been an existential race among the large hyperscalers. The midterm election results effectively provided the spark for a significant market downturn," Allen said. Vihari Ross, portfolio manager at Antipodes Partners, said the sell-off reflects not so much structural problems among AI companies as the market beginning to reassess the realistic conditions for the next phase of related investment. "Achieving the goals requires massive debt—which means the cost of capital is crucial, and interest rate levels are crucial; moreover, it also depends on whether sufficient electricity supply can be secured and whether market demand can remain at current levels," she said. "Assuming all companies can achieve perfect results is probably not a wise approach."