What happens to stocks if AI loses momentum?
Investing.com — In its latest note, Sevens warned that the market could face a significant headwind if enthusiasm for artificial intelligence stocks fades, even if the broader U.S. economy remains stable.
The note pointed to steep declines in two AI bellwethers this week, C3.ai, which fell 25% on Monday after issuing soft guidance, and CoreWeave, which dropped 21% following disappointing results.
“Those moves put a question in my head… What happens to this market if AI loses momentum?” Sevens Report said.
Drawing parallels to the early 2000s, Sevens noted that during the tech bubble, “the S&P 500 fell more than 20% from the highs in March 2000 through August 2001, but the economy was broadly stable.”
The firm stressed that “the tech bubble bursting was a market phenomenon,” with unemployment rising only modestly before later economic shocks hit.
While investors are focused on economic data, tariffs, and Fed policy, Sevens cautioned that “the economy could stay resilient… but AI begins to disappoint and the market drops despite macroeconomic stability.”
The firm highlighted that just five stocks, Nvidia, Microsoft, Meta, Broadcom, and Palantir, have accounted for 56% of the S&P 500’s 10.8% year-to-date gain. More broadly, the Information Technology and Communication Services sectors have contributed two-thirds of the rally.
“C3.ai and CoreWeave’s declines are a reminder that the AI revolution is continuing to mature and that execution will be important going forward,” Sevens said, warning that “if AI enthusiasm begins to fade, this market will face a headwind regardless of whether the economy is stable.”
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