From ICU to KTV! The Polarized "AI Narrative" Leaves Investors "Exhausted"

The AI stock market has undergone an extreme cycle of panic selling to exuberant buying within just two weeks, with hundreds of billions of dollars in funds flowing in and out as narratives shift, leaving investors exhausted.

Over the past two weeks, AI-related stocks have staged a dizzying "roller coaster"—first suffering a sharp setback after industry leaders called for a slowdown in AI development, causing the Nasdaq 100 Index to lose over $600 billion in market value within two days; then, a frenzy was triggered by the sensational popularity of Meta's personal assistant, leading to a strong tech stock rebound. From the September 15 low to the end of the week, the Nasdaq 100 Index recovered a total of $3 trillion in market value, reaching its first new all-time high since early June.

According to Bloomberg’s report on September 27, sentiment has swung violently between “AI will destroy humanity” and “AI will help you cancel unwanted subscriptions.” Wayve Capital Management Chief Strategist Rhys Williams said bluntly, “The amplitude of swings in both directions is stunning, and from a fundamental perspective, it’s nearly impossible to explain.” Laffer Tengler Investments CEO Nancy Tengler summarized, “This is a narrative-driven market, and the narrative changes almost weekly.”

Panic: One Article Sparks a $600 Billion Sell-Off

The trigger for this bout of volatility was an article published by Anthropic CEO Dario Amodei on September 12.

In the article, Amodei called for a slowdown in the development of frontier AI models—a move quickly endorsed by OpenAI CEO Sam Altman and SpaceX CEO Elon Musk, further intensifying market concerns over existential risks posed by AI.

The market’s reaction was almost instantaneous. On the first trading day after the article was published, AI infrastructure stocks saw a wave of concentrated selling—investors feared that a development slowdown would shrink demand for computing power equipment.

From September 14 to 15, the Nasdaq 100 Index dropped 1.5%. Shares such as CoreWeave and Lam Research fell over 9% each, erasing a combined market value of more than $600 billion in just two days.

Greed: Meta “Muse” Ignites a $3 Trillion Rebound

However, panic dissipated just as quickly last week. The explosive popularity of Meta's personal assistant Muse became the new catalyst for a dramatic reversal in market sentiment.

Meta’s share price soared 11% in a single day on Monday, putting the parent company of Facebook and Instagram on track for its best monthly performance in over a decade—after having long been under pressure due to doubts over whether heavy AI investments could generate returns.

AI chip and semiconductor sectors joined the rally: Arm Holdings surged 17% in one day, while Intel and AMD each rose more than 9%. The Philadelphia Semiconductor Index (SOX) rose 6% from Monday to Tuesday. By last Friday (September 25), the Nasdaq 100 Index had recovered $3 trillion in market value since its September 15 low.

Meanwhile, the enhanced capabilities of AI also triggered another round of “victim” sell-offs. The market expects AI agents to massively replace manual tasks in price comparison, travel booking, and customer service scenarios, making businesses reliant on subscription revenue and bargaining models the first to suffer: Insurance company Allstate fell 8.9% last week, cable operator Charter Communications plunged 12%, and Planet Fitness declined 14%.

History Repeats Itself: Violent Sentiment Swings Are Nothing New

Rapid sentiment shifts are nothing new for a market driven by AI for nearly four years.

At the start of 2025, the sudden rise of China’s AI model DeepSeek triggered a collective sell-off in semiconductor stocks, with Nvidia plunging 17% in one day. Earlier this year, the launch of a new AI tool from Anthropic also sparked a broad sell-off, from SaaS companies to asset managers.

Although the panic at the time proved to be exaggerated in retrospect, the importance of AI to the market and global economy continues to grow, with giants and startups ramping up investments, leading to ever-more-sensitive investor nerves.

The semiconductor sector’s volatility best illustrates the issue. From the start of the year until June 22, the SOX Index doubled in value, then plunged 29% before reaching its July 29 low. Although it has since rebounded, the index remains down 13% from its June peak.

Additionally, persistently rising interest rates are increasing the cost of AI development, and data centers are facing mounting social backlash—extra risks investors must consider beyond the AI spending narrative.

Valuation Fall Back: Crisis or Opportunity?

The dramatic sell-off has pushed the valuations of some AI stocks back to relatively reasonable ranges, sparking divergence.

Advisors Capital Management portfolio manager JoAnne Feeney takes an optimistic view. “You don’t have to believe this growth rate will persist for five years to own shares of companies like Nvidia or Broadcom, because their valuations have already come down dramatically,” Feeney said. Her firm holds both companies’ shares. “We’re likely on the eve of renewed interest in AI infrastructure’s core beneficiaries.”

According to Bloomberg data, Nvidia's recent valuation has fallen to its lowest level in over a decade—the forward P/E ratio based on expected profits for the next 12 months is less than 17, only half of its 2025 peak.

However, Daniel Pilling, a portfolio manager at Sands Capital Management, remains cautious.

“We manage this part of the portfolio with great humility because nobody truly knows where this technology is headed. Overall, I think the market's sentiment on AI is currently more worried than the optimism we saw in May or June.”

Tengler, on the other hand, believes that the prevailing skepticism is actually a sign of a healthy market. “What you don’t want to see is irrational exuberance, like in the internet bubble of the late 1990s,” she said.

Investors will receive new key signals this week. Memory chip maker Micron Technology will announce its earnings after the close on Wednesday, providing the latest guidance for AI spending prospects.

But analysts believe that regardless of the earnings result, sharp swings in market sentiment are unlikely to subside. Motley Fool Asset Management chief investment strategist and portfolio manager Bill Mann, who manages around $2.7 billion in assets, said:

“It’s easy to focus on ‘AI doom’ and equally easy to focus on ‘AI creationism.’ This will be a reality we all have to face in the market for a long time.”