Stocks Slip as AI Concerns Weigh on Market

New York, NY — U.S. stocks fell on Tuesday as technology shares continued to tumble due to worries about the valuations of artificial intelligence-related companies. The Dow Jones Industrial Average dropped 498.50 points, or 1.07%, closing at 46,091.74, while the S&P 500 lost 0.83% to finish at 6,617.32. The Nasdaq Composite decreased 1.21%, settling at 22,432.85. This marks the S&P’s fourth consecutive losing session, the longest downtrend since August.

The day’s downturn was influenced by AI chip leader Nvidia, which saw its stock drop nearly 3%. Other tech giants, including Amazon and Microsoft, also faced declines with Amazon falling over 4% and Microsoft down almost 3%. “We could see an 8% [or] 9% decline when all is said and done,” said CFRA‘s chief investment strategist Sam Stovall, discussing 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’s stock has declined over 10% this month leading up to its third-quarter results, which are expected after the market closes on Wednesday. Analysts predict Nvidia could report earnings of $1.25 per share, a 54% increase year-over-year, alongside revenues of $55 billion. Stovall noted the importance of Nvidia’s results in calming investor fears amid concerns over AI fundamentals.

A newly announced partnership involving Nvidia and AI startup Anthropic aimed to bolster investor confidence, but it had little impact on the market. According to reports, Microsoft will invest $5 billion in Anthropic, while Nvidia is also involved in the deal. However, both companies remained in the red following this announcement.

The cryptocurrency market mirrored the stock market’s troubles, with Bitcoin hitting a low of $89,259 before rebounding to around $92,000. The connection between tech stocks and cryptocurrency has made investors anxious about a potential market drop.

Adding to the complexity, Home Depot shares fell after the company reported an earnings miss and revised its full-year outlook downward, reflecting broader concerns about consumer spending and economic conditions.

Even amid the rough market, small-cap stocks showed resilience, with the Russell 2000 index gaining 0.8% during midday trading, contrasting with larger indexes.

In other news, recent advancements in understanding the U.S. labor market indicate that while job growth might not be collapsing, the overall situation remains tenuous. Analysts express concerns over stagnant job opportunities and the pace of hiring.