Nvidia ($NVDA) shares plunged 6.4% to $410.27 on Friday as over $18 billion in market value evaporated, sparking fears that Wall Street is losing faith in AI despite record Q3 data. Microsoft’s ($MSFT) $136 billion AI investment pipeline suddenly faces deeper scrutiny, raising questions about sector overvaluation and future growth. Has investor enthusiasm for AI already begun to crack?
Nvidia, Microsoft Drop Over 5%: AI Leader Stocks Face Selloff
Nvidia ($NVDA) stock declined 6.4% to $410.27 at Friday’s close, its sharpest single-day drop since March, after reporting a 31% jump in Q3 revenue that failed to lift investor sentiment, according to Bloomberg data. Microsoft ($MSFT) also fell 5.1% to $334.65, shedding $130 billion in market value within hours, even as it confirmed $13 billion in new AI infrastructure spending this month. Alphabet ($GOOGL) slipped 4.3% and Amazon ($AMZN) dropped 3.9% the same day, with selling pressure accelerating on November 8 as more than 170 million AI-sector shares changed hands—40% above the 30-day average (NYSE composite data, Nov 8, 2025). These moves reflect heightened skepticism about the near-term monetization of AI investments despite strong headline metrics.
Why Tech Sector Volatility Is Escalating Following AI Setbacks
The volatility in AI stocks has rippled across the tech-heavy Nasdaq, which closed down 2.7% for the week, erasing $450 billion in market capitalization from the index, based on FactSet data. Recent industry surveys by Gartner in October 2025 indicate that only 22% of Fortune 500 firms expect material AI-driven revenue in 2026, down from 35% in May 2025. This cooling sentiment comes as U.S. 10-year Treasury yields pushed above 4.8%, intensifying the discount rate on companies projecting long-term AI growth. Regulatory scrutiny over data privacy and chip export restrictions, highlighted in the latest U.S. Commerce Department statements, has compounded the uncertainty, tempering market enthusiasm even in proven AI leaders.
How Investors Can Navigate Shifting AI Sentiment in Portfolios
Investors holding large-cap AI stocks face both immediate risks and longer-term opportunities as the sector corrects. Short-term traders are increasing put option volumes on Nvidia ($NVDA) and Microsoft ($MSFT), with open interest jumping 36% week-over-week (CBOE data). Meanwhile, sector ETFs like VanEck Semiconductor ETF ($SMH) saw $500 million in net outflows, reflecting institutional repositioning. For those seeking diversification, rebalancing towards value and defensives may help mitigate drawdowns, while selectively retaining AI exposure for potential rebounds. For broader context on volatile sector rotations, check the latest stock market analysis and financial news updates from ThinkInvest. Market participants are also tracking macro catalysts such as the November CPI report and major tech earnings later this quarter, which may reframe sentiment toward AI.
What Analysts Expect Next for Leading AI Technology Stocks
Industry analysts observe that Wall Street’s AI optimism is recalibrating as profit realization timelines extend. Morgan Stanley strategists recently emphasized that “AI revenue cycles are likely to follow a slower, staircase adoption curve rather than a swift spike.” Market consensus suggests pricing power may narrow for chip designers and hyperscalers in 2026 as competition intensifies and cost pressures mount. Investment strategists note that institutional risk tolerance for high-multiple tech stocks has meaningfully declined since September 2025.
Is Wall Street Losing Faith in AI or Repricing the Sector for 2026?
The dramatic selloff in leading AI stocks reflects not an abandon of the sector, but a repricing of its near-term prospects. As investors question whether Wall Street is losing faith in AI, attention will focus on more concrete pathways to monetization and regulatory clarity. Monitoring upcoming earnings and fiscal policy updates will be critical for gauging whether the recent pullback signals a long-term sector rotation or merely a pause in AI’s ascent.
Tags: AI stocks, nvidia, msft, tech selloff, investor sentiment
