The Nasdaq Composite fell 2.9% on Friday, its steepest one-day decline since June, while the S&P 500 lost 1.8%. More than $2 trillion has been wiped off the Nasdaq 100 last month as investors reassess whether the hundreds of billions being committed to artificial intelligence infrastructure can generate returns commensurate with the investment.
The concern is not that demand for AI is fading. It is that the cost of building the AI economy — from data centres and chips to power and computing capacity — is rising faster than confidence in the eventual payoff.
For long-term investors, the correction could offer an opportunity to buy companies whose share prices have fallen faster than their underlying earnings prospects.
“US companies have posted strong earnings growth in Q3,” says Lakshmi Iyer, Group President–Investments and MD & CEO of Bajaj Alternate Investment Management. “There could be near-term volatile market moves. It would give investors an opportunity to cherry-pick stocks.”
The argument is for selectivity, not indiscriminate buying. Investors need to separate businesses with durable earnings and competitive advantages from those whose valuations depended largely on cheap capital and enthusiasm for the AI theme.