AI Stocks Cool As Wall Street Takes A Breather
What’s going on here?
Wall Street’s AI favorites, like Nvidia and Palantir, lost steam as tech stocks slumped and top banks warned of a looming correction.
What does this mean?
US stock indexes took a breather after a strong run, with the Nasdaq leading losses as excitement over tech and AI started to fizzle. Nvidia’s shares slid 4%, dragging the entire semiconductor sector lower, while Palantir plunged more than 8% in spite of positive outlooks—showing even star performers aren’t immune when sentiment shifts. Major voices at Goldman Sachs and Morgan Stanley flagged the risk of a 10% or greater market correction in the next two years, fueling investor caution. Meanwhile, Michael Burry’s bearish bets on Nvidia and Palantir intensified the nervous mood, even as hefty AI deals like Amazon’s $38 billion tie-up with OpenAI kept headlines buzzing. Investors hunted for safety, pushing the US dollar to a four-month high against the euro, while global shares turned lower. Softened expectations of Federal Reserve rate cuts, falling bond yields, and the delayed US jobs report due to the government shutdown left markets searching for clear direction.
Why should I care?
For markets: Shifting tides after record runs.
AI and chip stocks have fueled this year’s gains, but signs of fatigue are showing up as investors begin taking profits. Nvidia’s and Palantir’s sharp drops, even after upbeat results, underline just how quickly sentiment can change once trades get crowded. With leading banks and top hedge fund managers flashing caution, plus the US dollar hitting highs and rate cut hopes dimming, global stocks—from Europe’s STOXX 600 to bitcoin—are feeling the pressure. Volatility may stick around as investors shift focus from pure growth stories to rising risks.
The bigger picture: Macro headwinds cloud the outlook.
A stronger US dollar, the Fed’s steady stance, and delays to key economic data like the jobs report are putting the brakes on riskier assets worldwide. Lower oil and gold prices show commodities aren’t escaping the uncertainty either. These jitters highlight how shifting monetary policy and government disruptions are creating a tougher, more complex landscape for businesses and investors everywhere.
