The artificial intelligence sector is experiencing a significant downturn, with major AI-related stocks suffering substantial losses that some experts believe signal a fundamental reassessment of the technology’s potential. Nvidia has dropped 13% since November, while Oracle has plummeted 43%, and cloud computing provider CoreWeave has also declined double digits in recent months.
The latest wave of volatility was triggered by Anthropic’s debut of new plugins for its Claude AI agent, which sent legal tech stocks into a sharp decline and sparked broader sector turbulence. However, the downturn extends beyond this single catalyst, suggesting deeper concerns about AI’s commercial viability.
Gary Marcus, a prominent AI scientist and former Uber AI chief, has emerged as a leading voice interpreting these market movements. Marcus, who has long been skeptical of AI’s grandiose promises, argues that investors are finally “waking up to reality” after being “sold a bill of goods.” He predicts that AI stocks and OpenAI’s reputation will continue to deteriorate, stating that “the rockets will not reach the altitude so many people were hoping for.”
Marcus points to ChatGPT-5’s debut as a pivotal moment that disappointed investors and revealed the limitations of current AI technology. He specifically referenced Sam Altman’s early 2025 statement claiming OpenAI knew how to build AGI (Artificial General Intelligence) as an example of promises that now appear hollow given current capabilities. Marcus wrote that the ChatGPT-5 introduction was “the day people woke up to the reality that ChatGPT is not magic.”
The market dynamics reveal contradictory investor concerns. Some are abandoning companies like Nvidia due to worries about circular financing and the profitability of large language model (LLM) companies, while others are fleeing traditional software companies like Salesforce over fears that AI startups like Anthropic will disrupt their business models.
Marcus highlighted circular funding deals as particularly troubling, noting that “The Big Short” trader Michael Burry has also expressed concerns. He called out Oracle’s September deal as “peak bubble,” suggesting the market was artificially propped up rather than functioning organically. The tech sell-off continued with Google parent Alphabet declining sharply after earnings revealed aggressive capital expenditure plans, while the iShares Expanded Tech-Software Sector ETF dropped another 3%.
Key Quotes
Investors have been ‘rotating out of tech stocks’ — because they realize they were sold a bill of goods.
Gary Marcus, AI scientist and former Uber AI chief, explained his interpretation of the recent tech stock decline, suggesting investors are recognizing that AI’s promises have been exaggerated.
My guess is that these stocks — and the reputation of OpenAI — will fall further, but either way it is already clear that the rockets will not reach the altitude so many people were hoping for.
Marcus provided his prediction for the AI sector’s future, indicating he believes the downturn will continue and that AI technology won’t achieve the transformative impact many anticipated.
That fateful ChatGPT-5 introduction day last August — this Saturday will be the half anniversary — was the day people woke up to the reality that ChatGPT is not magic.
Marcus identified ChatGPT-5’s launch as a turning point when investors and the public began recognizing the limitations of current AI technology, marking it as a pivotal moment in the AI narrative.
That circularity is a warning sign, reflecting a market that is propped up rather than functioning well on its own accord.
Marcus expressed concern about circular financing arrangements in the AI sector, where companies invest in each other, creating an artificially inflated market similar to concerns raised by Michael Burry.
Our Take
This market correction may represent the AI industry’s “reality check” moment. While AI technology has genuine applications and value, the gap between current capabilities and the AGI promises made by leaders like Sam Altman appears to be catching up with valuations. The contradictory investor concerns Marcus identifies—simultaneously fearing AI companies won’t be profitable while worrying they’ll disrupt traditional software—reveal fundamental uncertainty about AI’s business model viability. The comparison to previous tech bubbles is apt, particularly regarding circular financing that artificially inflates valuations. However, unlike the dot-com bust, AI has demonstrated real utility in specific applications. The question isn’t whether AI will matter, but whether current valuations and expectations are sustainable. This recalibration could ultimately benefit the industry by forcing more realistic assessments and sustainable business models, separating genuine innovation from hype-driven speculation.
Why This Matters
This market downturn represents a potential inflection point for the AI industry, signaling that investor enthusiasm may have outpaced technological reality. The simultaneous decline of infrastructure providers like Nvidia, cloud platforms like Oracle, and AI application companies suggests systemic concerns rather than isolated issues. The implications extend far beyond stock prices: if investors are genuinely reassessing AI’s commercial potential, it could lead to reduced funding for AI startups, slower enterprise adoption, and a more cautious approach to AI integration across industries. The contradictory nature of investor concerns—simultaneously worrying about AI companies’ profitability and traditional software disruption—reveals deep uncertainty about how AI will reshape the technology landscape. For businesses planning AI investments and workers concerned about AI’s impact on employment, this reassessment could mean a slower, more measured transformation than previously anticipated. The involvement of respected skeptics like Gary Marcus and legendary investors like Michael Burry lending credibility to concerns about AI hype suggests this isn’t merely a temporary correction but potentially a fundamental market recalibration.
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Source: https://www.businessinsider.com/tech-stock-crash-ai-chatgpt5-gary-marcus-nvda-orcl-crwv-2026-2