The Nasdaq 100 Index experienced a significant downturn on Friday, slipping into correction territory. Investors have become increasingly cautious about the large-cap technology stocks that fueled the market's rise over the past two years. By mid-morning in New York, the index had dropped 0.8%, reaching a level 10.2% below its recent peak from last month. Notable declines were observed in major tech companies such as Nvidia, Amazon, and Microsoft. This shift reflects a broader rotation away from AI-focused firms, with concerns mounting over their future growth and profitability. The market sentiment is now more risk-averse due to economic uncertainties and geopolitical tensions.

Over the past few months, the allure of artificial intelligence has waned among investors. Since hitting an all-time high in mid-February, several leading tech stocks have seen substantial losses. Nvidia, for instance, has lost more than 20% of its value, significantly contributing to the overall decline of the Nasdaq 100. Other prominent decliners include Tesla, Apple, Palantir Technologies, Meta Platforms, and Amazon. Analysts attribute this drop to a combination of factors, including slower-than-expected earnings growth and heightened scrutiny of equity valuations. The once-promising AI sector has faced challenges, particularly as Chinese firms claim competitive advancements at lower costs.

Investors remain optimistic about the long-term potential of AI but are questioning the immediate returns. Despite robust earnings in the previous quarter, many tech giants are struggling to justify their high valuations. Companies like Nvidia and others have poured billions into AI development, yet tangible results have been limited. The market's skepticism is further fueled by China's rapid advancements in AI technology, which challenge the dominance of U.S. firms. Additionally, the weakening U.S. economy and rising geopolitical tensions have contributed to a general risk-off mood in the stock market. The S&P 500 has also seen a notable decline, dropping 7.2% from its February peak.

The Nasdaq 100's sharp rise earlier in the year made it a prime target for profit-taking. However, the underlying issues go beyond just taking profits. The changing dynamics in the tech sector, coupled with economic and geopolitical uncertainties, have led to a more cautious investment environment. Investors are now reevaluating the prospects of big tech, especially in light of the challenges facing AI investments. While the long-term outlook remains positive, the current market conditions suggest a period of adjustment and reassessment for these tech giants.