The value of major US tech stocks continued to fall yesterday, highlighting growing doubts around the value of artificial intelligence.
New York's tech-heavy Nasdaq closed 1% lower last night, led by falls in the values of Microsoft, Meta, Intel and Nvidia shares.
Having reached an all-time high in early July, the Nasdaq is down around 13%.
Having sky-rocketed in the past two years, shares in chip-maker Nvidia are trading 23.3% lower over the past month.
Shares in Microsoft - which has invested heavily in AI, including its multi-billion dollar backing of OpenAI - are down 14.4% in the past month.
Some critics of AI say it is overhyped, likening it to the dotcom bubble, however Lawrence Vesey, partner at Sia Partners, says the focus big tech has put on it is part of the process that has made these firms so lucrative.
"The tech sector has been successful because it's done a lot of experimentation and it's been tolerant of failure," Mr Vesey said. "All of that has ultimately led to the industry being the size that it is."
We need your consent to load this rte-player contentWe use rte-player to manage extra content that can set cookies on your device and collect data about your activity. Please review their details and accept them to load the content.Manage Preferences
He says that part of the current problem facing tech stocks right now is that the return on AI investments take time to materialise.
"There has been massive investment over the past number of years - over $42bn last year alone across equity rounds and so on," he said. "One of the challenges is that the lead time to turn this investment into revenues is relatively long - and much longer than your quarterly earnings expectations that public companies have.
"Data centres are not built in a quarter, so there is a definitely uncertainty."
Mr Vesey said there are a number of groups of companies currently operating in the AI space.
He said the share prices of chip-makers like Nvidia, as well as data centre providers, are "bumpy" at the moment.
"But fundamentally they are profitable and have solid businesses and other revenue lines to fund this," he said .
Others - like Microsoft - are large, profitable companies that are seeking to add the technology to their existing operations.
Again, though, these firms generally have strong revenues from other operations that allow them to cover the cost of these investments.
Others are the firms that are trying to use AI to enhance what they currently do.
Meanwhile there are many smaller, start-up firms that are specialising in niche AI applications.
These generally do not have other revenue streams, and so are reliant on venture capital investment to fund their early growth.
"The larger companies like Microsoft - while their share price might be under pressure, they have the assets and other revenues to put this in and they will come through," he said. "But there will definitely be a big shake-up in the smaller companies."
Somewhat caught in the middle of all of this are non-tech firms that are trying to see how AI may impact, and potentially enhance what they do.
"There are companies that are investing in AI, they're very focused, they are looking to have good business cases behind it, they're looking to delivery incremental value," Mr Vesey said. "For us and our company, AI is one additional tool as part of delivering new services to clients and to their customers.
"There is fundamentally going to be core value there, but there's definitely going to be a period where there's a lot of turbulence and some of that froth will ultimately be washed out of the market," he added.
