Stocks fell again on Tuesday as tech stocks continued to fall on concerns about the valuation of artificial intelligence-related stocks, and bitcoin briefly fell below $90,000 in a sign of reduced risk-taking by investors.
The Dow Jones Industrial Average lost 498.50 points, or 1.07%, to end at 46,091.74. The S&P 500 lost 0.83% to end the day at 6,617.32. It was the broad index’s fourth straight loss, its longest decline since August. The Nasdaq Composite fell 1.21% to end at 22,432.85. At their lowest levels during trading, the Dow Jones was down nearly 700 points, or 1.5%, while the S&P 500 and tech-heavy Nasdaq were down 1.5% and 2.1%, respectively.
The daily movements were pressured by Nvidia, the favorite of AI chips, which fell by almost 3%, and members of the “Magnificent Seven”, Amazon and Microsoft. Amazon was last down more than 4%, while Microsoft was down almost 3%.
“We could see an 8% decline [ili] 9% at the end,” CFRA chief investment strategist Sam Stovall said of the S&P 500. “It could even end earlier if we get the kind of earnings our analyst expects for Nvidia and if we get employment data that is weak but not recession-proof.”
Nvidia has fallen more than 10% this month, ahead of the chipmaker’s third-quarter results due after the close of trading on Wednesday. The firm, which is reporting near the end of a strong earnings season, has been at the center of a debate over the strength of AI-fueled market growth this year, as concerns over expensive technology valuations and the stability of AI fundamentals have grown due to booming debt offerings from big tech firms, SEEbiz reports.
“If a leading firm within a leading industry within a leading sector says very bullish things about the future while also reporting better-than-expected earnings, revenue and profit margins, I think that would go a long way to calming investors’ nerves,” Stovall said. “The real question is, ‘When are we going to cash in on all this capital investment?’ And that’s not going to happen this quarter or next quarter, but it’s expected in the not too distant future.”
A major artificial intelligence partnership announced Tuesday failed to lift related stocks as such deals have done in the past. AI startup Anthropic said it will spend $30 billion with Microsoft, and in return, Microsoft and Nvidia will invest billions in Anthropic. Nvidia and Microsoft remained in the deep red after work.
“At the moment we are going through a natural absorption of gains and people have to question the background,” the strategist continued. “Something else will have to happen to make investors say, ‘Well, wait a minute, maybe I expressed my concerns too soon.’”
