Wall Street Remains Bullish on AI Despite Latest Tech Sell-Off

Wall Street remains optimistic about the artificial intelligence trade despite a sharp sell-off in technology stocks last week, as rising financing costs and concerns about debt-heavy businesses weighed on investor sentiment, Ines Ferré reported for Yahoo Finance.

Technology stocks came under pressure as financing concerns weighed on AI infrastructure companies, although some investors remain confident in the sector's long-term prospects. 

Technology shares suffered losses as investors scrutinized the financing strategies of companies building AI infrastructure.

The weakness pushed the S&P 500 and Nasdaq Composite into negative territory for the week.

CoreWeave and its peer Nebius both finished the week down more than 25%, according to Ferré's report. Baird technology strategist Ted Mortonson previously warned that the two companies, along with Oracle, were among the weakest technology businesses in terms of free cash flow.

Mortonson pointed to a higher cost of capital and increased scrutiny of circular financing arrangements, in which companies may depend on closely linked commercial relationships and funding commitments to support growth.

The concerns have raised questions about whether some AI infrastructure providers can generate enough cash to support their substantial spending on data centers, computing capacity and equipment.

Nvidia Chief Executive Jensen Huang sought to reassure investors, expressing optimism about CoreWeave.

Nvidia's backing is significant because the chipmaker holds an approximately 10% stake in the cloud-computing company and is also a major supplier of its AI chips.

Patrick Moorhead, founder and chief analyst at Moor Insights & Strategy, described the latest decline as another bout of market anxiety rather than evidence that the AI investment trend has fundamentally broken down.

He noted that investors had previously reacted sharply to concerns surrounding China's DeepSeek AI model, tariff uncertainty and fears that enthusiasm for AI had peaked.

With AI-related stocks having risen substantially, Moorhead suggested that investors may be increasingly inclined to sell when concerns emerge rather than continue buying at elevated valuations.

Other analysts also pointed to continued demand for AI infrastructure as a reason for optimism.

CoreWeave, for example, reported a substantial revenue backlog reflecting customer commitments, although fulfilling those commitments will require significant investment and execution.

The latest sell-off highlights a growing distinction between confidence in AI's long-term potential and concerns about the cost of financing the infrastructure needed to support it.