Major Tech Firms Face Market Value Declines as AI Costs Rise

August proved turbulent for some of the world’s biggest tech companies as escalating costs tied to artificial intelligence (AI) development and growing fears of an economic downturn led to sharp declines in market values. Industry giants like Alphabet, Amazon, and Tesla saw significant losses, raising concerns about the resilience of tech stocks in the face of mounting financial pressures.

Alphabet Inc. (GOOGL.O) experienced a 4.7% drop in market value, largely driven by a slowdown in YouTube’s advertising sales. Additionally, a U.S. judge ruled that Google had violated antitrust laws, and the emergence of competition from OpenAI, which is developing an AI-based search engine prototype, further contributed to the decline.

Amazon.com Inc. (AMZN.O) also faced a decline, with its market value falling by 4.5%, as the company grappled with slowing online sales.

Tesla (TSLA.O) saw its market capitalization drop by 7.7%, following weaker-than-expected Q2 earnings and news that Canada planned a new 100% tariff on Chinese-made electric vehicles. The automaker, which started shipping Shanghai-made EVs to Canada last year, faces concerns about potential profit impacts from its higher-cost U.S. production base.

Nvidia (NVDA.O), a dominant player in the AI chip market, experienced a 7.7% decline in market value in the last week of August. Despite commanding over 80% of the AI chip market, the company’s projected third-quarter gross margins fell below market estimates, and its revenues only met expectations, disappointing investors who had hoped for stronger performance.

On the other hand, some companies enjoyed positive market outcomes. Eli Lilly (LLY.N) saw its market value surge nearly 20%, leading market gainers, driven by robust sales and the successful launch of a weight-loss drug that significantly reduces the risk of developing type 2 diabetes in overweight adults.

Berkshire Hathaway (BRKa.N) closed the month with its market value surpassing $1 trillion for the first time, reflecting strong investor confidence in the conglomerate that Warren Buffett built over nearly six decades.

Meta (META.O) also enjoyed a market value increase of nearly 10%, after exceeding market expectations for its second-quarter revenues and forecasting strong revenue growth for the July-September quarter. This indicates that strong digital ad spending on its platforms could help offset the costs of its AI investments.

News Source: Reuters
Reporting by Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru. Edited by Tomasz Janowski.