(Bloomberg) -- In a quarter marred by tariff uncertainty, US government spending cuts and the threat of recession, it is fears about a bubble brewing in artificial intelligence that have dealt the latest blow to the Nasdaq 100.

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The tech-heavy benchmark posted its worst quarter in nearly three years, down 8.3%, after a pair of warnings last week fanned anxieties about a possible pullback in the hundreds of billions of dollars flowing into data center infrastructure. The renewed selling stamped out a nascent rebound and left investors ducking for cover, yet again.

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The damage is piling up among the stocks that had, until recently, been the market’s biggest drivers. Chipmaker Nvidia Corp. has seen its shares tumble 28% from a January peak. Broadcom Inc. is down 33% from a record in December. Microsoft Corp., Amazon.com Inc. and Alphabet Inc. and Meta Platforms Inc. have all fallen 20% or more from their own records.

The Nasdaq 100 closed almost unchanged on Monday after falling as much as 2.5% earlier in the day amid worries that President Donald Trump’s anticipated tariff rollout on Wednesday will deal a blow to the economy.

“The questions about AI are coming at a time when there’s increased uncertainty overall, and at a time when they were priced for perfection, or close to it,” said Michael Mullaney, director of global market research at Boston Partners. “That makes them an extremely obvious place for investors who are broadly nervous to take profits.”

Tech behemoths led US stocks higher for most of the past two and a half years on excitement about AI and the future profits it would bring. The companies building AI models are making huge investments in the chips and data centers needed to train and operate their models.

At its peak in February, the Nasdaq 100 had more than doubled from a December 2022 low. While the average valuation in the index has fallen to 24 times estimated profits from 27 times last month, prices still remain elevated relative to the average over the past two decades, which sits around 20 times, according to data compiled by Bloomberg.

The latest round of hand-wringing on AI was set off last week when Alibaba’s co-founder said the rush to erect new facilities is getting ahead of demand for AI services. That was followed a day later by an analyst report about Microsoft — which alone has earmarked $80 billion for data center spending this year — walking away from new projects in the US and Europe due to oversupply.

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The warnings came not long after the emergence of advanced AI models out of China that were trained with fewer computing resources. Those models have challenged assumptions about the resources the US tech giants will need to assure their dominance. Doubts linger even though the four biggest spenders — Microsoft, Alphabet, Amazon and Meta — remain committed to capital expense plans that are expected to exceed $300 billion in their current fiscal years.

Even a small pullback in that spending would have big implications for companies like Nvidia that have benefited from the flood of money flowing into everything from chips and servers to energy and networking gear. Meanwhile, there are growing questions about how soon AI tools will start to get broader uptake in corporate America.

“If the return on investment was more apparent, there’d be less worry about whether the hyperscalers will continue to invest the way they have been,” said Barry Knapp, managing partner at Ironsides Macroeconomics.

The selloff has left many AI related stocks looking attractive to bulls, who expect the spending to continue as demand for the underlying services remains strong. OpenAI is reportedly expecting its revenues to triple this year and it is in talks to raise as much as $40 billion from Softbank Group Corp. and other investors.

The pricing of Nvidia at 23 times profits expected over the next 12 months is looking “defensive,” according to Melius Research analyst Ben Reitzes.

However, the prevailing sentiment on Wall Street right now is clearly one of gloom. That was palpable in the initial public offering market where cloud-computing provider CoreWeave Inc.’s highly anticipated debut last week turned out to be a dud. The Nvidia-backed company, which provides AI computing services, has seen its shares fall about 7% since the offering priced well below its initial target.

To Kim Forrest, chief investment officer at Bokeh Capital Partners, the whole picture shows how nervous investors have become about a slowdown in AI spending.

“It would have been a feeding frenzy in June of last year,” Forrest said of the CoreWeave debut. “All of this adds up to too many dollars chasing too little computing center demand.”

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--With assistance from Carmen Reinicke and Subrat Patnaik.

(Updates with tech news and earnings sections.)

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