Enterprise

Dow Bleeds 500+ Points as AI Bubble Fears Mount

  • The Dow Jones Industrial Average plummeted by more than 580 points as concerns over an artificial intelligence bubble intensified.
  • The S&P 500 recorded its fourth consecutive day of losses, highlighting a widespread market retreat.
  • Key tech stocks, including AI-darling Nvidia, fell despite major partnership news, signaling a significant shift in investor sentiment.
  • Bitcoin briefly plunged below $90,000, reinforcing the "risk-off" mood spreading from cryptocurrencies to the broader stock market.

Market Sell-Off Intensifies on Tech Weakness

Wall Street witnessed a brutal trading session on Tuesday as stocks fell sharply, driven by a continued slide in the technology sector. The Dow Jones Industrial Average shed 584 points, or 1.3%, while the S&P 500 dipped 1.1%, marking its longest losing streak since August. The tech-heavy Nasdaq Composite bore the brunt of the sell-off, losing 1.7%.

AI Stocks Lead the Plunge Amid Valuation Fears

The downturn was spearheaded by anxiety surrounding the sky-high valuations of stocks related to artificial intelligence. Nvidia, a bellwether for the AI boom, saw its shares fall by 2%. This decline is part of a larger 10% drop for the chipmaker this month, just ahead of its highly anticipated third-quarter earnings report. Other giants in the "Magnificent Seven," including Amazon and Microsoft, also faced significant pressure.

The market’s sour mood was not sweetened by a landmark AI partnership. AI startup Anthropic announced it would spend $30 billion with Microsoft Azure, with Microsoft and Nvidia, in turn, investing billions back into Anthropic. In the past, such news would have sent stocks soaring, but both Microsoft and Nvidia remained deep in the red, fueling fears that the AI rally has run out of steam.

Adding to the concerns, Alphabet CEO Sundar Pichai told the BBC that the current AI boom contains some "irrationality," warning that no company would be "immune" if the bubble were to burst.

Bitcoin Tumble Adds to Investor Jitters

The anxiety was not confined to equities. Bitcoin, often seen as a barometer for investor risk appetite, briefly dropped below $90,000. The cryptocurrency has been sliding since hitting a record high of $126,000 in early October. Many tech investors have significant holdings in crypto, and its decline is raising alarms that a more substantial stock market correction could follow.

Broader Economic Concerns Weigh on Markets

Beyond the tech sector, other factors contributed to the negative sentiment. Home Depot shares declined after the retailer missed earnings expectations and slashed its full-year outlook. Furthermore, growing uncertainty about the Federal Reserve's next move is unsettling investors. The probability of another interest rate cut in December has fallen from over 90% a month ago to roughly 50%, according to the CME FedWatch tool.

"The market narrative has certainly shifted dramatically," noted Garrett Melson, a portfolio strategist at Natixis Investment Managers Solutions. He explained that the market has gone from rewarding AI-related spending to "rapidly growing skepticism," creating the perfect conditions for a "sharp de-risking."

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