AI boom may be on its last legs amid stock volatility and dash for cash—but will go out in a blaze of glory with ‘blow-off phase’ before bubble pops

The Nasdaq is headed for its worst weekly loss in more than a year, and the S&P 500 is on track for a fifth consecutive drop. Similarly, after making history with the largest IPO ever, Space X stock has tumbled, and bonds it sold days ago are already sinking. It wasn’t supposed to be like this. With the U.S. and Iran finally ending hostilities, the path looked clear for the AI boom to reach even greater heights as oil prices and bond yields fell. In fact, South Korea’s high-flying Kospi stock index, which is dominated by AI darlings SK Hynix, and Samsung, set a new record just last week. Since then, it’s crashed 10% and saw its fifth worst daily plunge on Tuesday, sparked by SK Hynix’s comments that it planned to slow down its AI memory business. Global stock indexes followed. For analysts at Capital Economics, the volatility was especially worrisome, pointing out that such selloffs have previously only happened during bear markets like during the Asian financial crisis, the dot-com bubble, and the Great Financial Crisis. “This volatility is, in our view, evidence of excessive froth and calls into the question the sustainability of this rally,” James Reilly, senior markets economist, wrote. The fact that stocks around the world tumbled because of news from one Korean firm highlights how important semiconductors stocks have become, he added. Indeed, chips “have been the only game in town,” with their returns far outstripping even those of other AI-related stocks. “If the new market leaders, semiconductor firms, also start to struggle, the stock market would be in big trouble,” Reilly said. Strong earnings and guidance from chipmaker Micron on Wednesday appeared to put doubts about the AI rally at ease. But even that wasn’t enough. Apple’s price hikes due to chip shortages and a report OpenAI may delay its IPO to 2027 put stocks in a tailspin again. Expectations the Federal Reserve will hike rates soon h