United States benchmark averages retreated on Tuesday (Wednesday AEDT) as investors took profits in high-growth artificial intelligence names, cooling months of enthusiasm that had driven Wall Street’s record-breaking rally.
The Dow Jones Industrial Average fell 251.4 points, or 0.5%, to 47,085.3. The S&P 500 declined 80.4 points, or 1.2%, to close at 6,771.6, while the tech-heavy Nasdaq Composite tumbled 486.1 points, or 2%, to 23,348.6.
Losses were concentrated in AI-related shares such as Palantir, Oracle, and AMD, as traders grew increasingly wary of lofty valuations in stocks that have led this year’s bull market.
Mounting caution followed warnings from senior Wall Street executives about the likelihood of a market pullback. “We should welcome the possibility that there would be drawdowns, 10% to 15%, that are not driven by some sort of macro cliff effect,” Morgan Stanley CEO Ted Pick said at the Global Financial Leaders’ Investment Summit in Hong Kong, according to Reuters.
At the same event, Goldman Sachs CEO David Solomon offered a similar view, saying it’s “likely there’ll be a 10 to 20% drawdown in equity markets sometime in the next 12 to 24 months”.
“When you have these cycles, things can run for a period of time. But there are things that will change sentiment and will create drawdowns, or change the perspective on the growth trajectory, and none of us are smart enough to see them until they actually occur.”
Palantir shares slumped 8% from record levels, even after the data analytics firm beat Wall Street’s third-quarter earnings estimates and issued upbeat guidance driven by surging demand for its AI products.
The stock, which has gained more than 150% this year, now trades at over 200 times forward earnings.
Other major AI-linked names also came under pressure. Oracle fell 4%, paring its nearly 50% year-to-date rise.
Chipmaker AMD dropped 3.7%, while Nvidia lost 4% and Amazon retreated 1.8%.
The declines came after a mixed start to the week, with the S&P 500 and Nasdaq both closing higher on Monday while the Dow fell more than 200 points.
On the bond markets, the benchmark 10-year Treasury yield slipping 0.6% to 4.085% and the 2-year yield down 0.8% to 3.578%.
