In the second quarter of this year, the annual growth rate of the seven major tech giants (Mag 7) dropped from 50% in the previous quarter to nearly 30%, and it is expected to further decrease to around 17% in the third quarter.

This week's earnings reports from Microsoft (MSFT), Meta Platforms (META), Amazon (AMZN), and Apple (AAPL) indicate that these companies are still heavily investing in artificial intelligence (AI). However, investors are concerned about the lack of short-term returns, leading to a decline in stock prices.

The world's largest companies continue to invest significantly in AI. However, as the investments have not yet yielded the expected returns, the stock prices of Microsoft and Amazon have declined, reflecting the drop in Alphabet’s (GOOGL) stock price a week earlier. Tesla's (TSLA) earnings report released on July 24 also failed to satisfy investors, and Nvidia (NVDA) will release its earnings report later this month.

Investors have started shifting from large, reliable stocks to smaller, riskier market segments to reduce dependence on large tech companies. The combination of earnings results, the Federal Reserve's (FED) hint at a possible rate cut in September, and weaker-than-expected employment reports has led to a decline in the Nasdaq 100 Index.

Last Friday (August 2), the index fell 11% from its July high, entering correction territory. Investors sold off AI-related stocks and turned to bonds, causing Treasury yields to decline.

Kim Forrest, Chief Investment Officer at Bokeh Capital Partners, stated that the bond market indicates a need to quickly lower interest rates, which is worrisome. While low interest rates are typically favorable for stocks, if rates are cut too rapidly, it suggests poor economic conditions. Amazon's earnings report, along with reports from consumer companies like McDonald's (MCD) and Starbucks (SBUX), highlights weak American consumer activity, exacerbating concerns about a sluggish macroeconomy.

Burns McKinney, Senior Investment Manager at NFJ Investment Group, pointed out that recent earnings reports have reminded investors that the high valuations of tech stocks carry significant expectations. Despite some highlights in AI investments from Meta’s earnings report and AMD’s (AMD) optimistic revenue forecast.

Gene Munster, Partner at Deepwater Asset Management, believes that companies must increase AI investments or risk being eliminated from the market.

Adam Sarhan, Founder of 50 Park Investments, said the market's reaction does not signal the end of AI trading but rather indicates that investors are shifting from pure hype to demanding concrete results.