Market Drubs Magnificent 7 & Company After AI Reality Check

Tech giants impressed Wall Street with their recent quarterly earnings results. Days passed, and reality had set in. Aggressive spending plans on artificial intelligence raised red flags among investors. The result: AI and AI-related stocks got a severe beating on 6 November 2025.

NVIDIA, the acknowledged King of AI, fell 3.65% amid risk-off sentiment. All of the Magnificent Stocks finished in red territory. The AI bubble fear is as real as ever.

Michael Burry, the inspiration behind the 'The Big Short' movie, bet against the mortgage-backed securities (MBS) during the 2008 financial crisis. Now, the hedge fund investor is looking to do the same with artificial intelligence.

Collateral Damage

Advanced Micro Devices and Palantir Technologies reported record revenues and profitability in the third quarter of fiscal 2025, yet did not escape the carnage. The shares of the chipmaker sank 7.27%, while the defence AI stock tumbled 6.84%. Broadcom hardly moved, though its stock lost 5.55% in the last five trading days.

Social media platform Reddit uses and capitalizes on AI, but is not a big spender. Still, the communications services stock tanked 6.44%. It seems that any company that is in the AI race is collateral damage.

Snap is an exception, jumping nearly 10% to $8.01 per share. The parent company of Snapchat closed a $400 million deal with Perplexity. Under the agreement, the AI startup will compensate Snap to integrate some of its AI features into the Snapchat user interface early next year.

Bull Run Ends

Mega-cap tech stocks dominate the investment landscape, but the bull run that began in April 2025 came to a halt. According to Robert Edwards, chief investment officer at Edwards Asset Management, the pullback has been long overdue. The bears insist that a crash usually follows a strong bull market.

Other market analysts, however, believe it's just a pause. They expect the run to resume when the US federal government shutdown ends. The bulls argue that the recent Federal Reserve interest rate cut should also propel the market. A major monetary policy change is possible with the appointment of a new Fed Chief in May 2026.

More AI Deals and Partnerships

Despite concerns about accelerating AI investments, tech firms announce new deals and partnerships. AI startup Vast Data and cloud provider CoreWeave, both backed by NVIDIA, signed a $1.17 billion commercial agreement. The partners say demand for AI infrastructure is growing.

Microsoft, for instance, secured two multi-billion-dollar deals. The first is with Lambda, a builder of gigawatt-scale AI factories. Microsoft will deploy AI infrastructure using NVIDIA graphics processing units (GPUs). Its multi-year contract with IREN Limited to deliver GPU cloud services is worth $9.7 billion.

OpenAI and SoftBank formed an alliance to develop enterprise AI offerings for corporate Japan. The 50-50 joint venture, called SB OAI Japan, will offer the 'Crystal Intelligence' package, which aims to help organizations enhance productivity and management efficiency through the adoption of advanced AI tools.

SoftBank owns Arm Holdings in the UK. The Nasdaq-listed British semiconductor stock also declined (-1.21%) on Thursday.

Top Headwind

Jamie Dimon, CEO of JPMorgan Chase, said, 'There are a lot of things taking place today, and there's a lot of turbulence out there.' Big AI spending has replaced tariffs as the top headwind.

A market that relies heavily on mega-cap tech stocks for gains is not ideal. It lost over $400 billion in market value after the crash.

Disclaimer: Our digital media content is for informational purposes only and does not constitute investment advice. Please conduct your own analysis or seek professional guidance before investing. Remember, investments are subject to market risks, and past performance does not guarantee future results.