Megan is a senior researcher and writer at Which?, with a background in data analysis and stats in the public and charity sectors.
The rush to invest in artificial intelligence (AI) has ground to a halt, at least temporarily, as share prices of many major technology firms linked closely with AI have dropped in recent weeks.
Among the shares suffering are manufacturers of semiconductor chips crucial to many modern electronics.
Here, we look at the sell-off in context, and consider what questions you should be asking of your own investments.
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Find out moreBy February this year, the ‘magnificent seven’ (a group of the seven largest US tech stocks) had pledged a combined $680bn to be spent investing in AI, according to investing site The Motley Fool.
The 'magnificent seven' includes:
In the past five days, all of the magnificent seven, with the exception of Apple, have lost value to varying degrees.
Richard Hunter, head of markets at Interactive Investor said: 'Investors are growing increasingly cautious over whether the huge levels of investment into AI will provide adequate returns and, even if they do, over what timeframe. As such, some have chosen to reduce their exposure to this area of the market which still, on balance, continues to show decent gains.'
On Tuesday, South Korean tech companies SK Hynix and Samsung Electronics each fell by more than 10%, joining US counterparts in a downturn.
But big spending is not the only factor in this wobble.
Bola Onifade, portfolio manager at JP Morgan Personal Investing, said: ‘Spending is only one part of the picture and there are a few other themes weighing on AI and technology stocks. First, the prospect of new IPOs from high-profile AI companies has added to concerns that we could be at the top of the market.'
An IPO (initial public offering) is when a private company lists on a stock exchange for the first time, allowing members of the public to buy its shares.
Onifade continues: 'At the same time, China is making progress with AI models, leading to worries that it could be closing the gap with US-based leaders in the space.'
Chinese chip maker ChangXin Memory Technologies debuted on the Shanghai stock market this week with a share price increase of 470%.
Onifade adds: ‘Furthermore, the rise of Agentic AI is establishing a threat to software firms who could struggle to keep up with new coding technologies. Taken together, these factors and the uncertainty around the future progress of technology and AI companies have led to some investors trimming their exposure to these industries.’
Agentic AI describes AI systems that can independently plan and complete multi-step tasks, raising concerns that they could replace some software tools or reduce demand for traditional software.
Fear of an AI bubble bursting is something of a familiar story at this point.
The share value of Nvidia also dropped sharply at the end of April, having risen more than 30% in the month prior. Then, when the price recovered to a new high in mid-May, the price again dropped.
These drops will be minor relative to the gains made for investors who have held these stocks for a longer time.
Despite its volatility, Nvidia's share price is still up 4% since the start of the year.
Samsung, which has seen sharper drops than Nvidia, is up 65% since the start of the year.
Onifade said: ‘Indices with a high concentration of AI and chip companies, such as the NYSE Semiconductor Index and South Korea’s KOSPI Index, rose sharply in the first half of 2026 and more than doubled in value from the start of the year to early June. Since then, these indexes have given up some of their gains and are now up by around 70% and 40% year-to-date, respectively.'
Whether these drops foreshadow a more severe crash to correct huge share price rises is a matter of debate and, for investors, a personal judgement call.
Any investment is likely to have periods of losses, and you should always be focusing on the long term.
So temporary downturns should not necessarily spell disaster for you, or mean you need to take action. But, if looking at the long term you think some of your investments are likely to underperform, you might want to consider selling them.
Richard Hunter, head of markets at Interactive Investor, said: ‘Old market adages show that this conundrum has been one which has troubled investors for some considerable time.
‘Some are apparently contradictory but make perfect sense. For example, while it is “never wrong to take a profit”, traders will point to “running your winners and cutting your losers”. ’
This dilemma refers to the ‘disposition effect’, a cognitive bias that means we tend to hold on too long to losing stocks and sell profitable investments too early.
Hunter points to some helpful questions you can ask yourself to determine whether it's time to sell: ‘Consider the reasons you bought the shares in the first place – are they still intact? Does the holding still fit into your investment objectives? Has the share price rise (if applicable) unbalanced your overall spread of investments in your portfolio and requires reducing?
‘Is there an alternative that you could switch into (perhaps in the same sector) with a more obvious upside?’
If you only invest in AI stocks, you’ll feel the pressure of any drops in value more keenly – especially if you’ve bought them more recently.
Spreading your investments across different sectors and countries less directly reliant on AI and tech would act as a buffer against losses in this area, but would also lessen the intensity of any gains should this be a blip and the meteoric rise of tech stocks continues.
How much risk you decide to take on is a completely personal decision; there’s no objective right or wrong.
