There are fears that the AI bubble is set to dramatically burst as tech stocks plummet following a study that warned most artificial intelligence investments are yielding 'zero returns'.
It comes after the U.S. stock market exchange lost $1trillion in just four days as a tech stock sell-off escalated on Wednesday.
The S&P 500 was dragged down for a fourth consecutive session, falling by as much as 1.1 percent, but by the end of the day it recovered to a drop of 0.2 percent.
The drop-off came amid alarm generated by a report by Massachusetts Institute of Technology (MIT) researchers that announced most AI investments give 'zero return' for businesses.
MIT academics wrote: 'Despite $30-40bn in enterprise investment into Generative AI, 95 percent of organisations are getting zero return.'
Shares in leading designer of graphics chips, Nvidia the $4tn company that has powered the AI boom fell by 3.5 percent, its biggest drop in months amid a broader selloff in highly valued technology businesses.
Meanwhile, stocks in AI software giant Palantir sank 17 percent over six sessions - including a nine point drop on Tuesday - wiping $73B in market value.
There are fears that the situation may mirror a watershed moment in financial history 25 years ago.
A trader works on the floor at the New York Stock Exchange (NYSE) in New York, US, on Monday, Aug. 18, 2025
Trump Media & Technology Group Corp. and Palantir Technologies Inc. signage on the floor of the American Stock Exchange (AMEX) on Monday, July 28, 2025
In March 2000, stocks peaked during the 'internet bubble', before one of the most high-profile tech companies of the moment suffered a share price drop of 60 percent. Trillions of dollars were wiped out of the market as an avalanche of other collapses followed.
And MIT's recent findings on AI investments threaten to be the pin that pops the tech stock bubble, which has contributed trillions of dollars to the value of US stocks.
Since ChatGPT was launched in 2022, Silicon Valley promised that AI chatbots would transform the economy for the better - saving executives millions in costs. But the report suggests the AI revolution has come to a premature halt.
'Just 5 percent of integrated AI pilots are extracting millions in value, while the vast majority remain stuck with no measurable P&L [profit and loss] impact', the researchers found after surveying 150 business leaders and 350 employees.
The report also uncovered that despite extensive investment in AI software, 50 percent of projects concluded in failure. While 80 percent of businesses explored AI options, only 40 percent actually used it.
Meanwhile, 'enterprise grade systems' are being 'quietly rejected' by leading companies and only '20 percent reached pilot stage and just five percent reached production'.
Employees want to and do use AI, the study found, but they're relying on consumer products such as ChatGPT which they pay for themselves, as opposed to using elaborate and costly corporate tools.
'AI is already transforming work, just not through official channels,' the report acknowledged, but there's no shying away from its headline finding that nearly all investments by companies are yielding little return.
