U.S. technology shares lost momentum this week as doubts mounted over the durability of the artificial-intelligence trade that has powered markets for much of 2025. The Nasdaq Composite dropped 1.4% on Tuesday and the S&P 500 slipped 0.7%, while the S&P 500 information-technology sector is down about 2.5% for the week. Defensive groups such as consumer staples and utilities advanced as money rotated out of high-flying tech names. Selling accelerated after a Massachusetts Institute of Technology report found 95% of generative-AI projects are failing to generate any financial return, undercutting expectations that the technology would quickly boost corporate profits. The warning was reinforced by OpenAI Chief Executive Officer Sam Altman, who told The Verge last week that investors appear “over-excited” and that some are likely to “lose a lot of money.” Market leaders that have symbolized the AI rally were hit hardest. Nvidia slid 3.5% on Tuesday and is off roughly 5% since mid-August, while Palantir tumbled 9.4% in one session and about 16% for the week. Other big gainers of the recent AI boom, including Oracle and Advanced Micro Devices, fell more than 5% apiece. Elevated valuations—near 30 times forward earnings for the tech sector—and the heavy concentration of gains in a few stocks have amplified the pullback. Portfolio managers said some of the weakness reflects seasonal caution and positioning ahead of Federal Reserve Chair Jerome Powell’s speech at Jackson Hole on Thursday, which could influence expectations for a September rate cut. While several firms are reducing outsized tech allocations, many investors view the retreat as a correction rather than the end of the AI investment theme.