Wall Street calls AI tech rout a scare, citing strong backlog and demand

Wall Street analysts are characterizing this week's sharp decline in technology stocks as a temporary scare rather than a structural break in the artificial intelligence investment thesis. The sector, represented by the Technology Select Sector SPDR Fund (XLK), fell into negative territory for the week, dragging down key AI trade players and sending the S&P 500 (^GSPC) and Nasdaq (^IXIC) lower as financing concerns mounted.

The sell-off hit AI infrastructure providers particularly hard. CoreWeave (CRWV) and peer Nebius (NBIS) both closed the week down more than 25%. Baird tech strategist Ted Mortonson noted on Yahoo Finance that these companies, along with Oracle (ORCL), are "probably at the bottom" of the tech sector on free cash flow. Mortonson attributed the pressure to "a higher cost of capital" and increased scrutiny on circular finance arrangements.

Despite the price action, Nvidia (NVDA) CEO Jensen Huang sought to ease investor concerns by expressing optimism about CoreWeave. Nvidia holds roughly a 10% stake in the neocloud provider, making its backing significant for CoreWeave's valuation and stability. Patrick Moorhead, founder and chief analyst at Moor Insights & Strategy, told Yahoo Finance that he views the current volatility as "just another scare," comparing it to previous market events like the DeepSeek announcement and tariff-related crashes. Moorhead argued that because numbers on the AI trade are so large, market participants are looking for reasons to sell rather than buy.

Dan Ives, senior managing director at Wedbush Securities, described the sell-off as the "same script, different cast." Ives pointed to CoreWeave exiting the second quarter with a revenue backlog of roughly $104 billion, which reflects customer commitments already in place. He stated that he views this moment as AI infrastructure's "SaaSpocalypse moment," expecting a similar outcome to the software sell-off earlier this year that was sparked by fears of AI-driven disruption.

Statements from chip equipment maker ASML (ASML) and contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSM) indicated that AI demand remains robust. UBS strategists described the recent volatility as a "recalibration of expectations" rather than a fundamental break in the AI investment story. Ulrike Hoffmann-Burchardi, chief investment officer of Americas and global head of equities at UBS, wrote that investors should focus on where AI spending is translating into sustainable earnings growth and broader enterprise and consumer adoption.