Research institution Sage Road Research stated that the stock price of the AI company has dropped 20% from its peak in June

The research institution Sage Road Research released an executive summary of "The AI Trade," stating that since the beginning of this year, the Magnificent Seven has underperformed the Russell 3000 index by about 8 percentage points and the MSCI ACWI by nearly 9 percentage points. In July, the CBOE NDX volatility index relative to the VIX reached its highest point since the internet bubble, and after entering a correction, the Nasdaq index saw a 5% rebound over four days. As of the writing of the report, AI company stock prices have dropped 20% from their 52-week highs in June.

Companies are struggling to achieve returns on investment amid soaring AI costs, with Uber, Amazon, Meta, and Walmart implementing restrictions on employee AI usage. Model homogenization limits pricing power, and Chinese open-source models have become a cheap alternative to OpenAI and Anthropic. AI capital expenditures have exceeded expectations, with the consensus for 2026 rising from $527 billion at the end of 2025 to about $800 billion by mid-year. Capital expenditures for hyperscale cloud providers in 2027 are expected to account for 3% of U.S. GDP, more than double the peak of 1.2% during the late 1990s telecom fiber construction. Allianz Research calculates that there is nearly a 46% growth gap between AI investment and sales, worse than the 32% during the 2001 telecom bubble.

As of June, hyperscale cloud providers and related entities like Nvidia issued $225 billion in bonds, a year-on-year increase of 973.7%. The off-balance-sheet liabilities of tech giants have increased eightfold over four years to $1.65 trillion.