Hedge fund investor Michael Burry, who was the inspiration for the film The Big Short, has bet against Nvidia and Palantir shares
Shares of major technology companies have fallen over fears about the valuations of firms linked to the artificial intelligence (AI) industry.
Investors have grown increasing wary about what they are calling an "AI bubble" this year that has seen tech stock valuations hit record highs.
Major indexes in Asia were the hardest hit on Wednesday, following a sell-off in the US. Japan's Nikkei 225 closed 2.5%, dragged lower by tech investment giant, SoftBank, which plunged more than 10%.
AI valuation concerns took hold in the US as well after it was revealed the trader who inspired The Big Short has bet $1.1bn (£840m) on a fall in prices for AI-related stocks Nvidia and Palantir.
Hedge fund investor Michael Burry, who was played by actor Christian Bale in the 2015 film The Big Short, a film about traders who made millions from predicting the collapse of the US housing bubble in 2008, has turned his attention to AI.
Mr Burry's company revealed it has bought financial products, called options, that will pay out if the price of AI-linked companies Nvidia and Palatir shares fall.
It comes after the trader posted on X: "Sometimes, we see bubbles. Sometimes, there is something to do about it. Sometimes, the only winning move is not to play."
Markets worldwide have climbed in over the year as investors placed their chips in companies linked to AI, including Nvidia, Intel and AMD.
"It seems fatigue over AI and the current earnings run has investors questioning the sustainability of the AI hype. That's dragged down AI companies overnight in markets," said financial analyst Farhan Badami.
Many jumps in tech shares have been linked to major investments in firms. For instance, Amazon shares hit an all-time high on Monday after the announcement of a $38bn deal with OpenAI.
But the shares of many tech firms fell on Wednesday. Amazon's stock dipped by 1.84% and notably, Nvidia – recently the first company to ever be valued at $5tn – dropped by close to 4%.
SoftBank, one of Japan's largest firms, suffered one of steepest drop in shares. The fall weighed especially hard on Japan's Nikkei index.
The investment firm has invested heavily in AI development, channelling billions into tech companies like OpenAI, Intel and other players in the sector.
SoftBank's decline stems from the recent "sharp rally" in its shares, which investment analyst Vincent Fernando describes as a "double-edged sword".
The surge can attract investors, but also leaves the stock vulnerable to pullbacks whenever market sentiments shift, he said.
"The market can worry if the company is overspending on AI and won't make a sufficient return on that spend," said Mr Fernando from investment consultancy Zero One.
Tech shares also took a hit elsewhere in Asia.
South Korea's Samsung fell by more than 4% while the country's stock exchange index, the Kospi, was down by 2.85%.
TSMC, which makes semiconductors for Nvidia, was fell nearly 3%.
Mr Badami from financial services firm eToro believes the correction among tech stocks will continue over the next year.
"Investors seem to be feeling that some of the super-high valuations out there aren't making sense, and AI enthusiasm has definitely fuelled those stretched valuations."
Spending within AI-focused tech firms has been "really high, and for some companies, they are not making enough money to justify the spending," said Mr Badami.
Tech giants are spending big on AI in rush to dominate the boom
Is the AI boom a bubble?
The AI job cuts are here – or are they?
Crime fixer caught by BBC offering to erase £60K fines on migrant workers
Watch: BBC reporter confronts man at centre of illegal worker network
Prisons won't be fixed overnight, minister says, as police hunt for two men mistakenly released
Crime fixer caught by BBC offering to erase £60K fines on migrant workers
'Not again…' and 'Democratic cheer'
Inside Gaza, BBC sees total devastation after two years of war
'The science of a trustworthy face – and how to spot a liar (or Traitor)
In pictures: Wednesday's Beaver supermoon captured around the world
The justice system is failing – the buck stops with Lammy
How caffeine can help you manage headaches and three other tips
Democrats hit back and a winning message – four election night takeaways
US Politics Unspun: As Trump starts his second term, cut through the noise with Anthony Zurcher's newsletter
Alan Carr shares his treacherous Desert Island Discs
It's Florence + The Machine's turn in the Live Lounge
How can you look after your amazing heart?
Adrian Dunbar and Emma Thompson star in The Blue Boy
Miss Universe contestants walk out after organiser berates Miss Mexico
Crime fixer caught by BBC offering to erase £60K fines on migrant workers
'Not again…' and 'Democratic cheer'
William announces Earthshot Prize 2025 winners in Rio
Man drove at stabbings suspect after train attack
ADHD services shutting door to new NHS patients as demand soars, BBC finds
'Vibe coding' named word of the year by Collins Dictionary
The justice system is failing – the buck stops with Lammy
Interest rates expected to be held as Budget looms
Inside Gaza, BBC sees total devastation after two years of war
Copyright © 2025 BBC. The BBC is not responsible for the content of external sites. Read about our approach to external linking.