Tech Stocks Wipe Out Over $700 Billion As Traders Flee AI Hype

Tech stocks erased more than $700 billion in market value Thursday as rising skepticism over Fed rate cuts and looming energy bottlenecks in the AI sector triggered a sharp flight from risk.

The Nasdaq 100 – as tracked by the Invesco QQQ Trust (NASDAQ:QQQ) – fell 2.2% by late afternoon Thursday in its steepest drop since Oct. 10.

Nvidia Corp. (NASDAQ:NVDA) led the selloff, plunging 4.3% and losing a staggering $200 billion in market value. Other members of the so-called Magnificent Seven also took heavy hits: Tesla Inc. (NASDAQ:TSLA) tumbled 6.7%, Alphabet Inc. (NASDAQ:GOOGL) lost 2.5%, with both shaving off $100 billion in combined market cap.

Broadcom Inc. (NASDAQ:AVGO) dropped 7%, erasing $90 billion, while Amazon.com Inc. (NASDAQ:AMZN) and Microsoft Corp. (NYSE:MSFT) each shed around $70 billion.

Sentiment turned sharply risk-off, dragging CNN’s Fear & Greed Index back into “extreme fear” territory, echoing the tariff-induced selloff earlier in April.

Fed Raises Inflation Risks: Rate Cut Odds Tumble

A chorus of Federal Reserve officials voiced fresh concerns over persistent inflation, dampening hopes for rate cuts at the December meeting.

Boston Fed President Susan Collins said there’s a “high bar” for additional easing. Minneapolis Fed’s Neel Kashkari noted inflation remains “too high at 3%,” while San Francisco Fed’s Mary Daly added that “we still have work to do” to bring inflation back to target.

Cleveland Fed’s Beth Hammack said she hears from contacts that inflation is “moving in the wrong direction,” while St. Louis Fed’s Alberto Musalem said policy is near neutral and cautioned against over-accommodation.

Market odds of a 25 basis point cut at the June meeting fell to 51%, down from 65% just a day earlier, according to the CME FedWatch Tool.

AI Boom Faces Power Bottleneck

While tech stocks broadly declined, the AI sector was hit by growing fears of infrastructure bottlenecks—particularly around electricity supply and data center readiness.

AI cloud firm CoreWeave Inc. (NASDAQ:CRWV) spooked the market earlier this week when it warned of a fourth-quarter miss due to delays in data center deployment.

Goldman Sachs analyst Hongcen Wei flagged that looming U.S. power shortages could slow AI development, giving strategic advantages to overseas rivals such as China.

“Power infrastructure bottlenecks can be slow to solve,” Wei said in a note on Thursday.

Jordi Visser of 22V Research described the moment as a “regime change” in AI investing:

“The constraint has moved from capital to concrete,” he said, predicting 2026 would favor those who can convert contracts into working infrastructure while maintaining margins.

Veteran market watcher Ed Yardeni echoed these fears. “A lack of electricity and permitting — two very low-tech problems — might be the Achilles’ heel of this otherwise high-tech industry,” he said.

Yardeni highlighted that the AI revolution’s insatiable energy needs are already pushing grid capacity and electricity prices higher.

Nationwide, electricity bills have jumped: the average U.S. household paid $142 per month in 2024, up 25% from $114 in 2014.

In Virginia, where a third of U.S. data centers are located, AI facilities now consume 26% of the state’s electric supply, according to Pew Research.

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Image created using artificial intelligence via Midjourney.