AI Stock Sell-Off Tests President Trump’s Economic Strategy

Shares of the biggest artificial-intelligence (AI) firms on the Nasdaq have slipped over the past month, with a sharper decline this week as investors reassess massive AI spending. Semiconductor stocks fell on Tuesday and SpaceX dropped 20 % from its recent peak. The Nasdaq 100 still shows a 16 % year-to-date gain.

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President Donald Trump has tied his economic agenda to the rapid expansion of large AI businesses, which have become key drivers of U.S. growth. The AI-driven rally helped keep the economy steady through the Iran war and added roughly one percentage point to real growth in the first three quarters of 2025, according to the Federal Reserve Bank of St. Louis. Wall Street projects AI firms will spend over $700 billion on capital projects this year, a figure central to Trump’s political messaging.

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The White House declined comment on the market moves. Federal Reserve Chair Kevin Warsh signaled a hawkish stance on inflation, hinting at higher borrowing costs for AI firms. JPMorgan’s Michael Cembalest noted the administration benefits from AI offsetting growth-dampening policy impacts. Goldman Sachs analysts warned that the market is increasingly vulnerable to any news that challenges optimistic AI forecasts.

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Analysts warn that the high cost of top-tier AI models is driving firms toward cheaper alternatives such as China’s DeepSeek, and that rising interest-rate expectations could limit hyperscalers’ ability to recoup capital expenditures. Some see the sell-off as profit-taking after a strong rally from March lows, while others cite systemic vulnerability tied to AI’s outsized influence on both market and economic performance.

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• “If something were to dent the confidence of that top 10 percent, that would have a ripple effect into the real economy,” — Scott Clemons, Brown Brothers Harriman.

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• “We have more factories being built — and I mean car factories, AI factories, factories of every type — than we’ve ever had in the history of our country.” — Donald Trump, rally in Pennsylvania.

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• “There is a vulnerability [in] the system. If you look at what’s lifting market performance, but also economic performance, everything is coming back to AI,” — Philip Straehl, Morningstar Wealth.

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• “We believe today’s pullback likely reflects profit-taking following a strong rally from the March lows,” — Brock Weimer, Edward Jones.

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A sustained AI-stock decline could erode confidence among the nation’s wealthiest households, whose spending underpins broader consumer demand, and weaken Trump’s narrative that AI drives economic recovery, potentially affecting upcoming electoral calculations.

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Investors will watch the Federal Reserve’s policy decisions for interest-rate signals, while analysts advise diversifying away from AI-heavy sectors. Hyperscalers continue to assess the timing of returns on their expanding data-center investments.

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