U.S. stock markets faced another day of sharp declines on Tuesday, with major indices extending losses amid growing concerns over inflated technology valuations, while Bitcoin’s drop below $90,000 highlighted a broader retreat from riskier assets. The Dow Jones Industrial Average fell by 498.50 points, or 1.07%, to close at 46,091.74, marking a significant downturn. The S&P 500 lost 0.83% to end at 6,617.32, experiencing its fourth consecutive losing session—the longest such streak since August. Similarly, the Nasdaq Composite decreased by 1.21% to finish at 22,432.85, with all three indices hitting session lows that saw even steeper declines before a partial recovery.
Technology shares were at the forefront of the sell-off, driven by worries over the sustainability of artificial intelligence-driven rallies. Nvidia, a key player in the AI chip market, fell almost 3%, adding to a more than 10% decline this month ahead of its third-quarter earnings report. Other “Magnificent Seven” stocks like Amazon and Microsoft also slumped, with Amazon down over 4% and Microsoft nearly 3%, reflecting investor skepticism about high valuations.
Bitcoin’s performance mirrored the stock market’s woes, briefly dropping below $90,000 to around $89,259—its lowest level since April—before recovering to just above $92,000. This decline has pushed Bitcoin into negative territory for the year, down 2%, and signals a reduction in risk-taking behavior among investors who often hold both tech stocks and cryptocurrencies.
The broader market slide is attributed to concerns about AI fundamentals and the soundness of the tech rally, exacerbated by a boom in Big Tech debt offerings. Sam Stovall, CFRA’s chief investment strategist, suggested that the S&P 500 could see an 8-9% decline if earnings or economic data disappoint, emphasizing the need for positive signals from companies like Nvidia to calm nerves.
Despite a major AI partnership announcement—where Anthropic committed to spending $30 billion with Microsoft, and Microsoft and Nvidia invested billions in Anthropic—related stocks failed to rally. This indicates that investors are questioning the immediate monetization of AI investments, with Stovall noting that the benefits are expected in the “not too distant future” but not imminently.
Outside of tech, other factors contributed to the downturn. Home Depot shares slipped after reporting an earnings miss and cutting its full-year outlook, while small-cap stocks represented by the Russell 2000 bucked the trend with a 0.8% gain, though they remain down for the week. Additionally, layoff data showed a subdued pace, with private employers cutting an average of 2,500 jobs over the past four weeks.
The cumulative effect of these developments has raised fears of a broader market correction. With Nvidia’s earnings report due after Wednesday’s close, investors are closely watching for insights into AI demand and future growth. Analysts expect Nvidia to report a 54% increase in earnings per share and a 57% rise in revenue, but any shortfall could exacerbate the sell-off.
Looking ahead, the market’s direction may hinge on upcoming economic data and corporate earnings. If Nvidia and other tech giants deliver strong results, it could restore confidence; however, persistent concerns over valuations and economic headwinds like tariffs and inflation could prolong the downturn. Investors are advised to monitor key indicators for signs of stabilization or further decline.
