CNBC Daily Open: When AI hype hits gravity

The euphoria around artificial intelligence is colliding with the limits of reality, and cracks are emerging.

Last night, tech giants like AMD smashed expectations on AI chip demand, and Palantir reported another quarter of strong growth. Yet the Nasdaq fell, revealing Wall Street’s playlist is stuck on one track: AI mania.

Palantir — the poster child of that obsession — plunged nearly 8% despite its blowout quarter, while Oracle dropped almost 4%. Even AI darlings Nvidia and Amazon pulled back.

The message? It’s AI or nothing — and that tunnel vision is flashing warning signs.

Some CEOs are warning of a market correction, others of an inevitable mismatch between revenues and the massive capital expenditure needed to power AI. One CEO even told CNBC that stocks are in a correction, even if the S&P 500 hasn’t reflected it. 

Perhaps it’s time investors step off the hype train and look at the broader market — even the strongest empires fall when they start believing their own legend.

SoftBank market cap drops by about $32 billion. Shares plunged more than 14% Wednesday amid a broader drop in Asian AI-linked companies as investors turned wary of stretched valuations in the market’s most crowded trade.

PE industry consolidation. “How is it that there are more private equity funds in North America than there are McDonald’s franchises,” said KKR & Co’s co-CEO Joe Bae on Tuesday. PE managers are bracing for a wave of consolidation as investors demand higher returns and stronger governance. For reference, there are about 14,000 McDonald’s in the U.S. and 19,000 private equity funds.

Democrats sweep U.S. elections. Democrats made a clean sweep in the three biggest contested elections in the U.S. on Tuesday night, including in New Jersey and Virginia. In New York, self-described democratic socialist Zohran Mamdani beat out opponents Andrew Cuomo and Republican nominee Curtis Sliwa.

Asian markets tank. Japan’s Nikkei 225 dipped below the 50,000 mark on Wednesday amid a wider decline in Asia markets as investors fled AI-related stocks. South Korea’s Kospi also saw losses of as much as 6.16%, with chip heavyweights Samsung Electronics and SK Hynix posting losses. 

[PRO] Stocks in correction? CEO of Ritholtz Wealth Management Josh Brown said Tuesday the stock market is going through a correction, even if the indexes have yet to reflect it. 

Nvidia deepens India footprint with $2 billion deep tech alliance to mentor AI startups

Nvidia will help train and mentor emerging deep tech startups in India as a founding member of a $2 billion investment alliance, deepening its presence in the world’s third-largest startup ecosystem.

The U.S. chipmaker has joined the India Deep Tech Alliance (IDTA) — a group of private equity and venture capital investors pledging $2 billion for deep tech investments — as a founding member.

Deep tech startups are an umbrella term for emerging companies in semiconductors, space, AI, biotech, robotics, and energy.

— Priyanka Salve