Over the past three years, artificial intelligence stocks have driven overall market gains—drawing in everyone from the smallest retail investors to billionaire hedge fund managers. The reason is clear: AI promises to positively transform how many things work. This technology could help businesses improve efficiency, develop better products faster, and more—all of which ultimately translates into cost savings and revenue growth.
As a result, investors have rushed to buy shares of NVIDIA (NVDA), Palantir Technologies (PLTR), and other companies playing significant roles in the AI space. Over the past three calendar years, these two stocks have posted cumulative gains of over 1,100% and 2,600%, respectively.
However, market sentiment has shifted over the last few months. Seeing AI stock valuations soar, investors have grown concerned about whether these valuation levels are sustainable. Additionally, turmoil in Iran and uncertainty surrounding U.S. economic growth have added to investor anxiety. All these factors have weighed on AI stocks, including NVIDIA and Palantir. Therefore, it is reasonable to ask: Has the AI gold rush ended? In searching for answers, we might turn to two unexpected sources of information: Costco (COST) and Walmart (WMT). They have recently issued a particularly sobering warning to shareholders of NVIDIA, Palantir, and the entire AI market.
History shows that early investment in transformative, innovative companies can dramatically boost portfolio performance—witness the gains of smartphone giant Apple and e-commerce leader Amazon. Since Apple launched the first iPhone in 2007, and after Amazon’s profits surpassed the $1 billion mark about 15 years ago, their gains have been remarkable. Thus, investors hope to achieve similar returns by buying shares of companies that are leaders in the new, high-growth AI market. Analysts project the AI market could reach trillions of dollars by the end of this decade, so buying AI stocks early in this growth story could be highly rewarding.
But the recent market environment has not been favorable for AI stocks. The warning from Costco and Walmart to shareholders of the best-known AI stocks is as follows: In the first quarter, Costco and Walmart stocks significantly outperformed NVIDIA. During this period, the market capitalization of these two retailers increased by $60 billion and $103 billion, respectively. Meanwhile, NVIDIA’s market capitalization evaporated by $300 billion.
This indicates a clear investor shift away from market darlings toward companies perceived as “safer” in a difficult environment. It suggests that AI stocks may stagnate or continue to fall as investors seek safety amid turbulence.
However, does this mean the AI gold rush is over? Not necessarily. While stocks like NVIDIA may be falling now, there is no evidence to support the notion that they are out of the game. Tech companies continue to report strong demand for AI products and services, and customers are only just beginning to apply AI in real-world settings—AI’s practical applications involve chips, networking tools, and entire data centers. Therefore, as long as businesses and individuals use AI, many companies supplying key components and services will continue to win from a profitability perspective.
Overall, while the relative strength of consumer staples stocks like Costco and Walmart sends a short-term warning signal to AI investors—indicating a market rotation into defensive sectors—this does not represent the end of the long-term AI growth trend. Investors should patiently hold high-quality AI stocks and consider adding to positions when valuations become attractive.
