AI company stock prices fall 20% from June highs, Sage Road Research report reveals

ChainCatcher report: Research firm Sage Road Research released an executive summary of "The AI Trade," stating that since the beginning of this year, the Mag 7 has underperformed the Russell 3000 Index by approximately 8 percentage points and the MSCI ACWI by nearly 9 percentage points. In July, the CBOE NDX Volatility Index reached its highest level relative to the VIX since the dot-com bubble, and following the Nasdaq’s correction, a 5% rebound occurred over four days. As of the report’s writing, AI company stock prices have declined 20% from their 52-week highs in June. Companies are struggling to achieve return on investment amid surging AI costs, leading Uber, Amazon, Meta, and Walmart to impose restrictions on employee AI usage. Model homogenization is limiting pricing power, with Chinese open-source models emerging as cost-effective alternatives to OpenAI and Anthropic. AI capital expenditures have exceeded expectations, with consensus projections for 2026 rising from $527 billion at the end of 2025 to approximately $800 billion by mid-year. Super-large cloud providers’ capital expenditures in 2027 are projected to account for 3% of U.S. GDP—more than double the 1.2% peak seen during the late 1990s telecom fiber build-out. Allianz Research calculates a near 46% gap between AI investment and sales growth, worse than the 32% gap during the 2001 telecom bubble. As of June, super-large cloud providers and related entities such as Nvidia have issued $225 billion in bonds, a 973.7% year-over-year increase. Off-balance-sheet liabilities of tech giants have increased eightfold over four years to $1.65 trillion.