U.S. Stock Market Experiences Notable Decline Amid AI Valuation Concerns
Traders on the New York Stock Exchange faced a challenging day on Thursday as U.S. stocks exhibited a marked downturn.
The decline was particularly pronounced among firms that have reaped rewards from the artificial intelligence sector, reflecting mounting apprehension regarding their exorbitant valuations.
The Dow Jones Industrial Average plummeted by 401 points, a reduction of 0.8%. Concurrently, the S&P 500 dipped by 1%, and the Nasdaq Composite experienced a significant fall of 1.8%.
Notably, the Nasdaq 100 has shed over 2% since its closing last Friday, positioning it for its most dismal week since early April.
This downturn has been largely attributed to declines in heavyweight stocks such as Nvidia, Microsoft, Palantir Technologies, Broadcom, and Advanced Micro Devices.
Since the beginning of November, stocks related to artificial intelligence have oscillated unpredictably, a trend that continued throughout Thursday’s trading session.
Qualcomm saw a decline of 3% despite reporting quarterly results that exceeded expectations, primarily due to potential future business losses with Apple. AMD, which had previously performed well, fell by 6%.
Furthermore, Palantir and Oracle witnessed decreases of 6% and 2%, respectively. The shares of AI favorites, such as Nvidia and fellow “Magnificent Seven” member Meta Platforms, also fell sharply.
Mike Mussio, president at FBB Capital Partners, commented on the current landscape, noting that valuations for many stocks were exceedingly high and priced for flawless performance, resulting in a market dichotomy.
Companies that are merely beating revenue expectations, whilst issuing lackluster guidance, are facing scrutiny. He elaborated on the discrepancies in earnings among companies, highlighting the stark differences in performance metrics.
The day’s pullback was exacerbated by trepidation regarding the labor market. October boasted a staggering total of over 153,000 job cuts, nearly tripling the rate from September and marking a 175% increase compared to the same month last year, as reported by Challenger, Gray & Christmas.
This figure stands as the highest for October in 22 years, in a year that is poised to be one of the worst for layoffs since 2009.
Such data paints a precarious picture of the U.S. economy, particularly in light of the ongoing government shutdown—the longest in history—which has hindered the release of numerous economic indicators.
“We are gradually receiving fragmented economic data, which is not particularly optimistic,” Mussio stated.
He added, however, that this does not necessarily foreshadow a significant downturn, suggesting that a robust year-end rally could materialize if the government reopens and consumer activity proves resilient during the holiday season.
On Wednesday, equities linked to the expansion of artificial intelligence capacity experienced a brief resurgence after earlier valuation pressures led to declines.
In particular, AMD closed over 2% higher following an encouraging third-quarter report, lifting other AI stocks such as Broadcom and Micron Technology, while Oracle also recovered some lost ground.
Despite this temporary rally, all three major U.S. indices remain firmly in negative territory for the week.
Considerable losses were incurred on Tuesday when Palantir dropped about 8%, even after delivering robust quarterly results, contributing to a 2% decline in the Nasdaq that day.
This followed a contrasting advance for the Nasdaq on Monday, fueled by gains in Amazon and other AI-related stocks.
Investor focus on Thursday also shifted to Washington, as the Supreme Court deliberated the merits of the Trump administration’s tariff policies.
The justices expressed skepticism regarding the legality of these trade taxes, leading many investors to anticipate an unfavorable ruling against the administration.
Source link: Cnbc.com.
