Is the Stock Market Sending a Warning Signal About Artificial Intelligence (AI) Stocks?

Key Points
AI stocks have underperformed the market in 2026.
Many AI stocks are still growing at a rapid pace.
- 10 stocks we like better than Nvidia ›
You may be surprised to learn that even with a war in Iran and a so-so economy, the S&P 500 is only down around 5% from its high. The reality is that there's a lot of strength in various sectors across the market, and most companies are doing just fine. However, there's one sector of the market that isn't doing as well as the others in 2026, and it may come as a surprise: artificial intelligence (AI).
Although AI gets a ton of publicity and a huge amount of spending, investors haven't shown these stocks nearly as much love as they did during the previous three years. This has caused many impressive AI stocks to sell off, which may be a huge warning sign about the sector as a whole. However, I think investors should get a different signal from this sell-off, and now is the time to act.
Will AI create the world's first trillionaire? Our team just released a report on the one little-known company, called an "Indispensable Monopoly" providing the critical technology Nvidia and Intel both need. Continue »
AI stocks look like bargains
While there isn't an AI index investors can point to, one common exchange-traded fund (ETF) I use to track general AI stock performance is the Global X Artificial Intelligence & Technology ETF. This ETF is down around 9% from its all-time high, so it has fallen considerably more than the S&P 500, but it's still not a level most would find concerning.
If you peel back the layers a bit and look at some top investment options, you'll see several popular AI stocks down significantly from their highs. Among them are Nvidia (NASDAQ: NVDA), Microsoft (NASDAQ: MSFT), and Palantir Technologies (NASDAQ: PLTR). These three represent the leaders in three different areas of AI investing. Nvidia is a play on AI infrastructure, Palantir is an AI software company, and Microsoft is a cloud infrastructure and business integration investment.
Of these three, Nvidia is faring the best, but Microsoft and Palantir are each having a much worse time.
But when you dig into the results of each of these businesses, it's clear that AI demand is still there, and each expects huge growth for several years.
I think investors are experiencing a bit of AI fatigue and are looking to alternative investments rather than AI. While this may be bad for AI stocks in the short term, over the long term, it's an excellent opportunity for investors to buy AI stocks at a discount. Demand for AI is still expected to expand through 2030, and all three of these stocks could be great picks over that timeframe.
Should you buy stock in Nvidia right now?
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $495,179!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,058,743!*
Now, it’s worth noting Stock Advisor’s total average return is 898% — a market-crushing outperformance compared to 183% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.
*Stock Advisor returns as of March 21, 2026.
Keithen Drury has positions in Microsoft and Nvidia. The Motley Fool has positions in and recommends Microsoft, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.