AI Stock Frenzy Peaks Then Falters: Nvidia Wobbles, Alibaba Soars as Global AI Boom Faces Reality Check

by Marcin Frąckiewicz
in AI, Finance, Technology
on 30 August 2025

Key Facts

Wall Street’s AI rally hit turbulence: U.S. stock indexes pulled back on Aug. 29 from record highs as major AI-linked stocks like Dell and Nvidia tumbled businesstoday.com.my businesstoday.com.my. The Nasdaq sank 1.15% and the S&P 500 fell 0.64% on Friday, though both still notched strong monthly gains on AI optimism and hopes of Fed rate cuts businesstoday.com.my businesstoday.com.my.
Nvidia’s record run meets resistance: AI-chip leader Nvidia reported booming sales and an upbeat outlook, but its stock dipped ~4% over Aug. 28–29 as results failed to wildly surpass investors’ sky-high expectations and uncertainty loomed over its China business investopedia.com reuters.com. CEO Jensen Huang remained emphatic that “a new industrial revolution has started. The AI race is on”, projecting a “$3 trillion to $4 trillion” AI infrastructure market by 2030 reuters.com.
Dell’s AI server boom vs. profit squeeze: PC and server maker Dell surged in AI hardware sales, raising its annual revenue forecast on a “$20 billion” wave of AI server orders from clients like Elon Musk’s xAI and CoreWeave reuters.com. Yet its stock plunged ~9–10% after Dell warned high production costs and fierce competition in AI servers are “blunt[ing]” margins and undercutting near-term earnings reuters.com reuters.com.
Chipmakers diverge on AI outlook: Marvell Technology, a chip firm tied to data-center AI, plunged 18–19% in a single day after issuing weaker-than-expected revenue guidance despite the AI chip boom investopedia.com reuters.com. In contrast, Broadcom – another AI-exposed chip giant – slid a milder ~3% alongside Nvidia, as investors reassessed lofty valuations investopedia.com. The PHLX Semiconductor Index fell 3% on Aug. 29 amid the broad tech selloff investopedia.com.
Alibaba sparks Asia’s AI surge: China’s Alibaba saw its U.S.-listed shares skyrocket 13% on Aug. 29 after reporting a surprise jump in cloud-computing revenue driven by AI demand, and unveiling its own cutting-edge AI chip reuters.com. The news made Alibaba one of Wall Street’s most-traded stocks Friday businesstoday.com.my and underscored how Asian tech giants are racing to develop in-house AI silicon.
AI pure-plays face growing pains: High-flying AI server maker Super Micro Computer sank ~5% after disclosing “material weaknesses” in its financial controls that could “adversely affect” timely reporting reuters.com reuters.com. The filing – coupled with an auditor resignation last year over governance concerns – wiped over $1 billion off Super Micro’s market value and spooked investors in one of 2023’s hottest AI hardware stocks reuters.com.
Global M&A and investment heat up: Established players are pouring cash into AI. For example, cybersecurity firm CrowdStrike announced a $290 million deal to acquire Onum, a data analytics startup, to “stop breaches at the speed of AI” with autonomous cybersecurity csoonline.com. CEO George Kurtz said processing more data gives CrowdStrike “the larger the moat… from an AI perspective”, reflecting an industry arms race for AI talent and tech csoonline.com.
Regulators weigh in worldwide: The U.S.-China tech standoff cast a cloud over AI chip sales – Nvidia excluded all China revenue from its forecast as export license uncertainties persist reuters.com. In Washington, a deal was struck for licenses in exchange for a cut of Nvidia’s China sales, but geopolitical risks remain reuters.com. Meanwhile in Europe, officials are pressing ahead with strict AI regulations: “There is no stop the clock… no pause,” an EU spokesperson said, rejecting industry calls to delay the EU’s landmark AI Act that began phasing in this August reuters.com. Such rules, along with Canada and others eyeing AI oversight, could reshape the playing field for AI companies globally.

Wall Street’s AI Rally Hits a Speed Bump

After months of euphoria, U.S. markets took a breather as August closed out, led by weakness in AI-focused stocks. On Friday, Aug. 29, the S&P 500 and Nasdaq retreated from all-time highs amid a tech sell-off investopedia.com investopedia.com. The Nasdaq Composite sank 1.2% while the S&P 500 lost 0.6%, breaking a streak of gains as traders locked in profits on this year’s AI-fueled winners investopedia.com investopedia.com. Tech mega-caps were mostly lower: Nvidia slid 3.4%, extending a 3-day decline; Tesla and Broadcom fell over 3%; even giants like Meta and Amazon were dragged down about 1–2% investopedia.com. This broad dip in tech weighed especially on semiconductor names – the PHLX Semiconductor Index dropped more than 3% as traders rotated out of high-fliers investopedia.com.

Several AI-exposed stocks saw sharp reversals. Enterprise software titan Oracle, which has trumpeted major AI investments, tumbled nearly 6% on Friday investopedia.com. Similarly, Super Micro Computer (a pure-play AI server manufacturer) sank 5.5% in one day investopedia.com. Both had initially climbed earlier in the week after Nvidia’s earnings, but as one analyst noted, “the rally lost steam” heading into the weekend investopedia.com. “Today is just weakness in the top of the market, in tech… This is not the first time we’ve had worries about over-investment in AI [and] lack of monetization,” observed Zachary Hill of Horizon Investments, reflecting some profit-taking after the frenzied AI run-up reuters.com.

Despite the pullback, August remained a banner month. All three major U.S. indices posted a fourth straight month of gains, fueled in large part by AI optimism businesstoday.com.my businesstoday.com.my. Investors have been betting that surging demand for artificial intelligence will boost revenues across chips, software, and cloud companies – a thesis that drove the Nasdaq up over 1.6% in August and helped the S&P 500 notch +1.9% businesstoday.com.my. Notably, AI-centric stocks and funds far outperformed: Morningstar’s Global Artificial Intelligence index was up 26.7% year-to-date by mid-August, handily beating the broader market by ~16 percentage points ainvest.com. This outperformance shows how central the “AI trade” has become in 2025. However, it also raises the stakes – any hint of AI growth slowing or hype overreaching can spur volatile swings, as late August’s action demonstrated.

Nvidia’s High Expectations and China Headwinds

Chipmaker Nvidia – whose stunning revenue growth this year made it the poster child of the AI boom – delivered strong fiscal Q2 results, yet found itself a victim of its own success on Wall Street. On Aug. 28, Nvidia reported another quarter of surging data-center chip sales and issued an upbeat forecast for the upcoming quarter reuters.com reuters.com. Crucially, Nvidia projected $54 billion in revenue next quarter – well above analysts’ estimates – signaling that insatiable demand for its AI GPUs (the engines behind services like ChatGPT) shows no sign of cooling reuters.com. CEO Jensen Huang emphatically “dismissed” any notion of an AI spending slowdown, asserting that opportunities will “expand into a multi-trillion-dollar market” in coming years reuters.com reuters.com. “A new industrial revolution has started. The AI race is on,” Huang declared, putting a $3–4 trillion figure on expected global AI infrastructure investment by 2030 reuters.com.

Yet Nvidia’s shares fell about 2% on Thursday and slid another 3% Friday despite the strong numbers reuters.com investopedia.com. The lukewarm reaction boiled down to two words: China uncertainty. Nvidia shocked some investors by excluding any future sales to China from its guidance due to the murky status of U.S. export restrictions reuters.com. Washington’s chip curbs – and President Donald Trump’s negotiations tying export licenses to a cut of Nvidia’s China revenue – have made it “impossible to forecast” that portion of business, as Morgan Stanley analysts noted reuters.com reuters.com. Essentially, Nvidia guided conservatively, leaving out an addressable China market that Huang estimates could be $50 billion/year if U.S. policies allow it reuters.com. “Politics has got in the way of [Nvidia’s] grand ambitions for global domination,” observed analyst Dan Coatsworth, pointing out that “AI demand is not the problem… it’s [geopolitics]” restraining Nvidia’s outlook reuters.com.

There were also whispers of “AI fatigue” creeping in. Nvidia’s results, while excellent, were “not a massive beat” relative to towering expectations, said Quilter Cheviot analyst Ben Barringer reuters.com. After a historic 2025 stock run-up, “the stock likely ran too far, too fast… I’d buy these shares if and when they settle,” remarked Paul Meeks of Freedom Capital, praising Nvidia’s fundamentals but noting the hype had overshot in the short term reuters.com. Other experts countered that Nvidia’s dominance remains unshaken. “Despite plenty of would-be rivals, Nvidia’s dominance remains clear in a white-hot AI market,” said Menlo Ventures’ Tim Tully, who expects next-gen Nvidia chips to drive “another wave of growth” as ever-larger AI models demand more horsepower reuters.com. Indeed, Nvidia’s sheer profitability is soaring – last quarter its net income exceeded even Apple’s, an almost unimaginable feat a few years ago reuters.com.

All told, Nvidia’s report confirmed that AI spending is still in “early stages” of a long boom reuters.com. The company is essentially selling everything it can produce – “the buzz is: everything [is] sold out,” Huang quipped on the earnings call reuters.com. But the mix of sky-high investor hopes and macro risks (like trade wars) means even Nvidia can stumble on Wall Street. The stock’s slight pullback hardly dents its year-to-date doubling, and many bulls see it as a healthy pause. “These results are good for a normal company in normal times, but Nvidia is neither,” noted Jay Goldberg of Seaport Research, warning that “lack of China revenue… is a concern” if restrictions persist reuters.com. In short, Nvidia’s AI engine is still revving at full throttle, but the road ahead has a few more speed bumps than investors had imagined.

Dell and Marvell: AI Boom, Meet Reality

Outside of pure-play chip firms, the AI boom is reverberating across hardware makers – with mixed consequences. Dell Technologies, a stalwart PC and server company, stunned the market by emerging as an unexpected winner in the AI gold rush. On Aug. 28, Dell raised its full-year revenue forecast up to $109 billion (from a prior $101–105B) on the back of red-hot demand for its AI-optimized servers reuters.com. The company said orders for its high-end AI servers were so strong that it now expects to ship $20 billion worth this year, up one-third from its earlier $15B estimate reuters.com reuters.com. CEO Michael Dell highlighted surging interest from AI startups and cloud providers – notable customers include CoreWeave and even Elon Musk’s new AI venture, xAI reuters.com. In other words, Dell has quickly become a key supplier of the expensive server hardware needed to train and run AI models, positioning itself as a major beneficiary of the AI arms race.

Investors initially cheered Dell’s AI-driven sales beat – but then changed their tune once they dug into the profit numbers. Dell’s stock plunged about 9–10% on Aug. 29, suffering the S&P 500’s biggest one-day loss investopedia.com investopedia.com. Why? Because chasing the AI opportunity came at a cost. Dell revealed that to secure big AI hardware deals, it had to prioritize filling orders fast – even if it meant higher production expenses and cut-throat pricing. The company’s gross profit margins shrank to 18.7%, missing estimates, as supply-chain hiccups and expedited shipping ate into profits reuters.com. Its earnings guidance for next quarter also came in light (forecasting $2.45 EPS vs. $2.55 expected) reuters.com. J.P. Morgan analysts noted Dell “prioritized fulfilling AI server orders over maintaining margins”, accepting near-term profit squeeze in exchange for landing large AI contracts reuters.com reuters.com. And while revenue is getting a nice uplift from AI, Dell faces intensifying competition from rivals like Hewlett Packard Enterprise (HPE) and others fighting for the same AI server market reuters.com. In short, Wall Street grew concerned that Dell’s AI sales “boom” might not translate into a boom in profits — at least not yet. The stock’s drop wiped out roughly $8 billion in market value reuters.com reuters.com, showing that investors want to see AI growth and healthy margins hand-in-hand.

For Marvell Technology, a semiconductor maker that supplies chips for data centers and networking, the story was even harsher. Marvell had been touted as an “AI picks-and-shovels” play, riding the coattails of Nvidia’s data-center growth. But on Aug. 29 its shares cratered 18–19% after Marvell issued a disappointing sales outlook reuters.com investopedia.com. The company’s forward guidance fell below analysts’ estimates, suggesting that parts of its business (like storage or networking chips) weren’t seeing as much of an AI bump as hoped reuters.com. This massive one-day plunge – Marvell’s worst in years – led the Nasdaq-100 losers and exemplified the market’s “show me the money” attitude toward secondary AI beneficiaries investopedia.com. Investors punished Marvell for underperforming expectations at a time when Nvidia’s tidal wave of demand hasn’t lifted all boats. Similarly, chip equipment makers like Lam Research and Applied Materials slid 2–3% that day investopedia.com, revealing broader jitters in the semiconductor food chain despite the AI trend.

At the same time, not every tech firm was bruised. Some AI-leveraged companies actually soared on their own strong reports. Notably, software maker Autodesk jumped 9% on Aug. 29 – the top gainer in the S&P – after crushing earnings estimates and crediting robust demand for its design software used in AI data center projects investopedia.com. And cybersecurity firm SentinelOne saw its stock pop about 6% as it beat sales forecasts and highlighted growing need for AI-driven security solutions investopedia.com investopedia.com. These bright spots underscore that AI’s ripple effects are reaching all corners of the tech sector – from infrastructure to software to security – but investors are differentiating winners from losers. The late-August market action essentially reset expectations: companies must prove real earnings and guidance uplift from AI, not just hype, to keep rallying. As the AI revolution matures, Wall Street is likely to reward those turning hype into tangible growth, while punishing those who fall short of lofty forecasts.

Chinese Tech Join the AI Party: Alibaba’s Breakout

On the other side of the world, Asian tech giants are riding their own AI wave, with China’s Alibaba delivering the biggest headline. Alibaba – often called the “Amazon of China” – announced quarterly results that blew past expectations, fueled in large part by its bets on artificial intelligence. The company’s cloud division posted its fastest growth in over a year, driven by surging demand from Chinese businesses for AI-powered cloud services reuters.com. Even more eye-opening, Alibaba revealed it has developed a cutting-edge AI chip in-house reuters.com. This new chip, likely designed for AI and cloud computing tasks, signifies a major step by Alibaba into the semiconductor arena traditionally dominated by U.S. firms. The dual good news – strong AI cloud revenues and a homegrown AI chip debut – sent Alibaba’s U.S.-listed shares soaring 13% in one day reuters.com. The stock was one of the most actively traded on Wall Street that session businesstoday.com.my, as global investors rushed to reprice Alibaba as an emerging AI leader in the Chinese market.

Alibaba’s surge underscores how Asia’s big tech players are aggressively investing in AI, both to drive new growth and to reduce reliance on foreign tech. Other Chinese titans like Baidu, Tencent, and Huawei are likewise pouring resources into AI research – from Baidu’s development of generative AI models to Huawei’s work on AI chips – spurred in part by U.S. export curbs that have limited access to top-tier Nvidia GPUs. In Alibaba’s case, its new AI chip (reported by Wall Street Journal) could help power everything from e-commerce recommendations to cloud analytics, giving it a strategic edge reuters.com. The market reaction suggests investors see China’s tech firms entering a new phase where AI prowess will define the pecking order.

Beyond China, AI momentum is evident across Asia-Pacific markets. In Taiwan, chip foundry giant TSMC has projected record-breaking 2025 revenues as AI chip orders fuel demand for its cutting-edge 3nm fabrication lines digitimes.com. In Japan and South Korea, electronics companies are touting AI features in consumer gadgets and enterprise solutions. It’s a global race – and Silicon Valley’s AI boom is now mirrored by a Beijing and Taipei AI boom in their own right. That said, China’s AI champions face their own hurdles: government regulators there are crafting rules on deepfakes and generative AI, and U.S. sanctions still restrict access to top-end chip technology. But Alibaba’s 13% jump showed that, at least for now, the market is rewarding those who can demonstrate real AI tech development and revenue traction, East or West.

Global Policy and Regulation: Balancing Boom and Oversight

While companies chase the AI opportunity, governments around the world are increasingly grappling with how to regulate AI – a factor that could profoundly affect “AI stocks” in coming years. In the United States, the key issue has been trade and security regarding AI-critical hardware. The Biden (now Trump) administration has tightened export controls on advanced AI chips to China since 2022, citing national security. In a twist, President Trump negotiated a deal in August allowing Nvidia some export licenses for its high-end H20 AI chips in exchange for 15% of revenue from China sales going to the U.S. government reuters.com. Nvidia’s Huang indicated willingness to even share a cut of its upcoming Blackwell chip sales if it meant keeping access to the huge China market reuters.com. This kind of unprecedented arrangement underscores how geopolitics and business are colliding in AI. Uncertainty over U.S.-China relations forced Nvidia to guide cautiously – a clear reminder that government actions (export bans, tariffs, etc.) can swiftly alter AI demand and supply chains. Investors are watching closely for the Biden/Trump administration’s next moves on AI export policy, as any tightening or loosening could swing stocks like Nvidia, AMD, and their Chinese counterparts.

In Europe, regulators are charging ahead with a comprehensive AI governance regime. The EU’s Artificial Intelligence Act, a landmark law to set guardrails on AI systems, officially commenced its rollout this summer. As of August 2025, new rules for “general purpose AI” models have kicked in, and more stringent requirements for high-risk AI applications will take effect by August 2026 reuters.com. Despite lobbying from tech companies to delay implementation, Brussels has been unequivocal: “There is no stop the clock. There is no grace period. There is no pause,” European Commission spokesman Thomas Regnier said, squashing hopes for a postponement reuters.com. This hard-line stance means firms operating in Europe must now start complying with transparency, safety, and data governance rules for AI or face hefty fines. For big U.S. players like Google, Meta, and Microsoft (all of whom have major AI initiatives), the EU’s tough approach introduces compliance costs and potential limitations on certain AI features. European tech companies, meanwhile, have voiced concern that overly strict rules could hamper innovation and put them at a disadvantage just as they try to catch up to U.S. and Chinese AI leaders reuters.com reuters.com. Nonetheless, the EU is intent on setting a global standard – its AI Act could effectively become a blueprint that other countries follow, much as EU data privacy law (GDPR) influenced worldwide norms. For investors, this raises a longer-term question: will regulatory risk temper the breakneck growth of AI stocks, or will it simply weed out bad actors while letting the true innovators thrive? At the very least, any company dealing in AI in Europe will need to budget for compliance and adapt to new rules, making regulatory savvy almost as important as technical savvy.

Elsewhere, Asia-Pacific regulators are also stirring. The Chinese government in late August implemented new rules for generative AI services, requiring security reviews and user ID verification for models that go public. While China’s rules aim to control content and ensure alignment with state ideology (thus more about censorship than investor protection), they do create an additional layer of complexity for Chinese AI companies – though thus far, firms like Baidu have received licenses to launch ChatGPT-like bots under these guidelines. In Canada, a recent poll showed 85% of Canadians favor regulating AI bnnbloomberg.ca, and the government is weighing an Artificial Intelligence and Data Act to address AI transparency and safety. The UK is convening a global AI safety summit this fall, signaling its intent to play a role in setting international AI standards. All told, the regulatory environment for AI is tightening just as the technology’s adoption accelerates.

For AI-focused equities, regulation is a wildcard. It could raise barriers to entry, benefiting incumbents who can afford compliance, or it could crimp certain business models (for instance, if data usage is restricted or liability for AI outcomes is increased). So far, none of the late August news from regulators has created an immediate shock to AI stock valuations – the market’s attention is still mostly on growth prospects. But the drumbeat of oversight is growing louder, and savvy investors are beginning to factor in that the freewheeling days of “move fast and break things” in AI might be ending. Going forward, the companies that navigate the regulatory maze effectively – e.g. by building ethical AI practices, lobbying smartly, and adapting products to new rules – could have an edge in the trust and sustainability that both users and investors demand.

Big Deals and Bold Moves in the AI Arena

The closing days of August also underscored how mergers, acquisitions, and strategic investments are red-hot in the AI sector, as companies rush to acquire AI capabilities and talent. One headline-grabbing deal came from CrowdStrike, a cybersecurity firm whose stock has surged on its AI-enhanced threat detection platform. On Aug. 28, CrowdStrike announced it will pay $290 million to acquire Onum, a small Spanish startup specializing in real-time data pipelines for AI csoonline.com csoonline.com. The goal is to turbocharge CrowdStrike’s security operations center with “agentic” AI – essentially using AI to autonomously detect and respond to hacks in real time. “This is how we stop breaches at the speed of AI,” said CrowdStrike CEO George Kurtz, touting that Onum will stream high-quality data to fuel CrowdStrike’s AI models csoonline.com. “The more data we can process, the larger the moat we actually have… from an AI perspective,” Kurtz told Fortune, highlighting that in AI, scale of data is a competitive advantage csoonline.com. The acquisition, CrowdStrike’s ninth, shows how even outside of core “AI companies,” players in industries from security to finance are snapping up AI startups to stay ahead.

It’s not just one-off deals; it’s a trend. In the enterprise software arena, Workday (HR software giant) announced in August two AI-related takeovers – including a buyout of Paradox, a specialist in AI recruiting chatbots, to expand Workday’s AI talent acquisition offerings. Consulting powerhouse Accenture has been on an AI shopping spree as well, acquiring companies like Japan’s SI&C and U.S.-based NeuraFlash in late August to bolster its AI and data expertise newsroom.accenture.com. And over in healthcare AI, data platform Tempus announced it is acquiring fellow AI startup Paige (which focuses on AI for pathology) to deepen its capabilities in medical diagnostics tempus.com.

Investment dollars are flooding into the space, and venture capital deals are translating into IPOs and M&A at a rapid clip. Global VC funding for AI startups in 2025 has been at record levels, and now larger firms are writing checks to buy these innovators outright. For instance, chipmaker AMD in 2024 acquired Nod.ai; cloud leader Oracle bought AI healthcare firm Cerner; and more tie-ups are expected as legacy companies race not to get left behind. From an investor’s perspective, this M&A activity can be a double-edged sword: it validates the value in AI upstarts (often lifting valuations across the board), but it also means traditional tech firms are spending heavily (which can drag on near-term earnings). In late August, however, the news of acquisitions like CrowdStrike’s was generally cheered as a savvy long-term move to cement a leadership position.

Moreover, sector-focused exchange-traded funds (ETFs) are capitalizing on the enthusiasm. AI-themed ETFs – such as Global X’s BOTZ (robotics & AI ETF) and others – have seen strong inflows and performance this year. Some high-profile investors are even piling into indexed AI funds. A Nasdaq analysis on Aug. 30 highlighted that certain billionaires increased stakes in an AI index fund that could turn modest monthly investments into big returns over time nasdaq.com. The premise is that a basket of AI leaders can deliver outsized growth as AI transforms industries. Indeed, the broad-based interest in AI stocks has made them core holdings: 7 of the 10 top weights in the S&P 500 are now companies touting AI at the center of their strategy, from Microsoft and Google to Nvidia and Meta. This concentration means the fate of “AI stocks” is increasingly the fate of the overall market.

Finally, industry insiders are cautioning about bubbles and long-term perspectives even amid the exuberance. “AI may be the next in a long line of bubbles to burst on Wall Street,” one Yahoo Finance column warned finance.yahoo.com, pointing to frothy valuations. OpenAI’s CEO Sam Altman – arguably one of the catalysts of the AI craze – mused earlier in August that investors are possibly “overexcited” about AI’s near-term prospects reuters.com, even as he remains optimistic about AI’s world-changing potential. Those comments gave some investors pause: could the hype be running ahead of reality? The late-August market swings, the mixed earnings reactions, and the rotation into some AI names and out of others all suggest a maturing environment. The AI revolution is well underway, but it won’t lift all boats evenly. Investors are now sifting hype from substance – rewarding companies that deliver real AI-driven growth, and punishing those that disappoint or face hiccups.

Bottom line: In the span of Aug. 29–30, 2025, we witnessed a microcosm of the current AI-investing era – euphoric highs tempered by first signs of caution. The period saw sensational growth (Nvidia’s earnings, Alibaba’s AI-fueled jump), sobering setbacks (Dell’s margin squeeze, Marvell’s crash), and strategic maneuvers (M&A and regulatory posturing) across the U.S., Europe, and Asia. AI remains the driving narrative of global markets, but as summer turns to fall, both companies and investors are learning that sustaining the “AI stock boom” will require navigating challenges from competition to politics. The coming months will reveal whether this was a healthy consolidation before the next leg up, or an early sign that the AI trade’s momentum is entering a new, more discerning phase. For now, one thing is clear: no one is ignoring AI – not Wall Street, not Main Street, and certainly not the halls of power worldwide. The world’s next trillion-dollar companies (and perhaps bubbles) are being minted in real time, and August’s final days showed just how captivating and volatile that journey can be.

Sources: Reuters businesstoday.com.my reuters.com reuters.com reuters.com investopedia.com reuters.com reuters.com csoonline.com reuters.com, Investopedia investopedia.com investopedia.com, CSO Online csoonline.com, etc.