Traders work on the floor of the New York Stock Exchange.
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Stocks fell again on Tuesday after tech shares continued to slide on concern about valuations of artificial intelligence-related stocks and as bitcoin dropped briefly below $90,000, a sign of reduced risk-taking by investors.
The Dow Jones Industrial Average was down 625 points, or 1.2%. The S&P 500 shed 1.1%, putting it on pace for its fourth straight losing session, which would be its longest slide since August. The Nasdaq Composite lost 1.5%.
The day’s moves were pressured by AI chip darling Nvidia, which fell 2%, and fellow “Magnificent Seven” members Amazon and Microsoft. Those two pulled back 3% each.
“We could see an 8% [or] 9% decline when all is said done,” CFRA’s chief investment strategist Sam Stovall said about the S&P 500. “It might even end up concluding sooner if we get the kind of earnings that our analyst is expecting for Nvidia, and if we get employment data that is weak but not pointing to recession.”
Nvidia has fallen 10% this month leading up to the chipmaker’s third-quarter results due after Wednesday’s close. The company, which is reporting toward the end of a strong earnings season, has been at the center of a debate about the strength of the AI-powered market rally this year, as concerns have grown about pricey tech valuations and the soundness of AI fundamentals due to a boom in Big Tech debt offerings.
“If the top company within the top industry within the top sector says very optimistic things about the future while at the same time reporting better than expected earnings, revenues and profit margins, I think that would go a very long way to calming investor nerves,” Stovall said. “The real question is, ‘When do we monetize all of this capex?’ And that’s something that’s not going to happen this quarter or next, but it is something that is expected in the not too distant future.”
A big AI partnership announced Tuesday failed to lift related stocks like such deals have in the past. AI-startup Anthropic said it will spend $30 billion with Microsoft and, in turn, Microsoft and Nvidia will invest billions in Anthropic. Nvidia and Microsoft remained deep in the red following the deal.
“We’re going through a natural digestion of gains at this point, and people have to question the backdrop,” the strategist continued. “Something else will have to happen to make the investors say, ‘Well, wait a minute, maybe I was too early on my worries.'”
Bitcoin dropped below $90,000 on Tuesday before recovering. Many tech investors also have large cryptocurrency holdings so the decline raised worries that a bigger stock market drop may follow. Bitcoin was last trading just above $91,000.
Outside of tech, Home Depot shares declined after the home improvement reported an earnings miss and cutting its full-year outlook.