AI has been the talk of Wall Street for the past several years now. But the recent sell-off—including this week’s free fall in one-time AI darlings Marvell Technology (MRVL) and Palantir (PLTR)—left investors scratching their heads.
With the threat of tariffs looming, analysts like Northwestern Mutual’s Chief Equities Portfolio Manager Matt Stucky warn that the already battered tech sector is more vulnerable than most.
“The downside to tariffs—let’s say it spills over into a mild recession—I think the probability of outperformance from more defensive areas of the market, like consumer staples and healthcare, is much higher than something like tech,” Stucky said.
The bottom falls out for MRVL stock
Chipmaker Marvell Technology was once a key driver of the AI boom, thanks to its powerful microprocessors. The company’s fortunes, however, reversed on Thursday—with shares plunging nearly 20%— despite posting earnings that beat expectations.
Along with a host of other broad and sector-specific factors that led to the sell-off, Evercore ISI analyst Mark Lipacis noted another issue that took a tool on MRVL stock.
“A key investor debate is whether Marvell or Taiwan-based competitor Alchip Technologies has won the follow-on custom AI processor chip to Amazon, called Trainium 3,” Lipacis said.
The uncertainty triggered a wave of price target cuts from at least 17 analysts. Melius Research analyst Ben Reitzes put it bluntly: “Boy, sentiment is rough for AI semis right now.”
Data-mining firm Palantir, which had dodged much of the tech sector’s bloodbath, wasn’t spared Thursday. The stock dropped more than 10%, marking the latest in 32 single-day swings of 5% or more over the past year.
Some of the day’s other big AI-related losers included Nvidia, which shed 5.7%, and Broadcom, which was down 6.3% ahead of its latest earnings report.
Seeing the forest, not the trees
Although Wall Street is trimming some of the excesses from the frothy market, and several former high-flyers have come crashing down, analysts who look beyond the short term remain bullish.
For example, Ark Invest CEO Cathie Wood sees healthcare as the next major AI frontier. “We’ve got 37 trillion cells in our body, and they’re going to be sequenced as we’re looking for cures,” Wood recently said.
With data at the heart of modern healthcare, AI appears to be a natural fit. She’s backing that belief with new bets on Tempus AI (TEM)—which fell sharply alongside the broader market on Thursday.
For Palantir, a silver lining may come from its partnership with TWG Global, which aims to merge AI with financial services. That deal has already boosted Palantir’s 2025 earnings forecast by 12.5% to $0.54 per share in just the past 30 days.
Looking ahead, AI’s disruptive technology is here to stay. While Wall Street is pulling back from frothy AI valuations and shifting toward defensive stocks for now, the long-term outlook for AI remains strong.
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