Market Jitters Over AI Investments Intensify
Fears that global markets are caught in a significant artificial intelligence bubble escalated dramatically on Thursday. This followed a statement from Sam Altman, who was forced to deny that his company, OpenAI, had asked the US government to guarantee its debt.
The controversy triggered a sharp sell-off in AI-related stocks, dragging the technology-heavy Nasdaq down by more than two per cent by the close of trading. This decline extends a noticeable losing streak for major tech firms.
Tech Giants Face Steep Declines
Several industry leaders saw their stock values tumble. Nvidia, the chipmaker led by Jensen Huang, has seen its shares drop by more than 10 per cent in just the past five days. Palantir, the US software giant, fell by 12 per cent, while Meta shares are down nearly a fifth since the company recently reaffirmed its plans to aggressively increase spending on AI.
These dramatic stock movements have amplified concerns that the years-long tech boom, fuelled by intense speculation around artificial intelligence, has evolved into a bubble that may not yield the financial returns investors are expecting.
High Valuations and Big Bets Against AI
Unease is growing over the sky-high valuations of AI companies. For instance, Palantir has been trading at over 200 times its forward earnings. This sentiment was underscored when Michael Burry, the investor famous for predicting the 2008 financial crisis, disclosed a billion-dollar bet against both Palantir and Nvidia.
The sell-off began in earnest earlier in the week, but accelerated after comments from Sarah Friar, OpenAI's Chief Financial Officer. At a California event, she suggested the company was exploring an "ecosystem" of funders that "maybe even [included] governmental" support, specifically mentioning the benefits of a federal backstop to lower financing costs.
Altman's Clarification and Lasting Concerns
On Thursday, November 6, 2025, Sam Altman moved to backtrack on these remarks. In a post on X, he stated that OpenAI's leadership "believe governments should not pick winners or losers, and that taxpayers should not bail out companies that make bad business decisions."
However, the damage was done. His clarification sparked a wave of investor anxiety, with many worrying that private sector appetite for funding the enormous capital expenditure required for AI infrastructure might be waning. Analysts have even drawn parallels to the events leading up to the 2008 financial crisis.
Further fuelling concerns are complex financial deals and growing interconnectedness between major tech players. Recently, Meta secured a record-breaking $30bn off-balance-sheet debt agreement, while Google's owner, Alphabet, sold $17.5bn of bonds in the US.
David Morrison, a senior analyst at Trade Nation, noted the unusual nature of the sell-off, stating there was "no obvious catalyst." Conversely, Adair Turner, former chair of the FCA, played down fears of a crisis on the scale of the Global Financial Crisis, arguing that post-2008 regulations have left banks better capitalised to withstand such shocks.
