U.S. tech shares show vulnerability after a massive run, with investors concerned about AI-driven gains. Funds are shifting away from the sector ahead of Federal Reserve Chair Jerome Powell’s Jackson Hole speech, stirring caution in the market. The S&P 500 tech sector dropped about 2.5% this week, with Nvidia and Palantir taking hits.

The recent tech sector decline follows a 50% rally since April, outpacing the broader S&P 500. Tech stocks are at lofty valuations, with the sector’s P/E ratio at a one-year high. Concerns about AI investments arise, with studies showing limited returns and warnings about overexcitement about AI’s potential.

Some AI-linked stocks have pulled back sharply, including Nvidia and Palantir, amid concerns over AI disruptions. Despite the caution, enthusiasm for AI investments remains strong. The upcoming Jackson Hole symposium is seen as critical, with August and September historically rocky months for stocks. Powell’s speech may impact market expectations for rate cuts.

Investors are cautious about tech stocks due to stretched valuations and the impending Fed decisions. Some sectors like consumer staples, healthcare, and financials are up, signaling a possible broadening of gains. Powell’s speech could impact tech stocks due to their sensitivity to interest rates. Investors are adjusting tech weightings in anticipation of potential market shifts.

Read more at Yahoo Finance: Analysis-US tech-stock stumble shows vulnerability in AI trade