AI ‘bubble’: transition to an economy of small language models without recession

At the end of July 2024, top tech companies faced a wave of investment outflows and a drop in share prices. The “Big Seven” tech giants (Meta, Microsoft, Amazon, Apple, Alphabet, Tesla, and Nvidia), which account for a third of the S&P 500’s market value, collectively lost $653 billion in market capitalization in one day.

The fall in share prices reflects the sentiment of investors who do not see the results of their investments and decide to redirect their funds. Nvidia shares fell 7.8% after the company’s CEO and CFO announced that they would increase spending on computing infrastructure.

Investors were disappointed that Microsoft’s cloud revenues for the last quarter grew by only 29% year-on-year, leading to capital outflows.