According to Financial Times News, US stocks dropped sharply on Tuesday with the S&P 500 falling 1% and Nasdaq Composite declining 1.8% as investor concerns about artificial intelligence company valuations intensified. Bitcoin briefly fell below $100,000 for the first time since June amid the broader sell-off. Palantir, which has the highest valuation relative to profits of any S&P 500 company, plunged as much as 10% despite lifting its 2025 revenue guidance. Uber slipped 6% even after reporting $13.5 billion in quarterly sales, a 20% year-over-year increase. The declines followed warnings from Goldman Sachs CEO David Solomon and Morgan Stanley CEO Ted Pick about potential 10-15% market drawdowns at the Global Financial Leaders Investment Summit in Hong Kong.
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The AI valuation reckoning
Here’s the thing about AI stocks – they’ve been carrying the entire market for months. And when you’ve got companies like Palantir trading at absolutely insane multiples, eventually reality has to set in. What’s fascinating is that even companies beating revenue expectations are getting punished. Uber posts solid numbers and still drops 6%. That tells you this isn’t about fundamentals anymore – it’s pure sentiment.
Basically, we’re seeing the classic “buy the rumor, sell the news” pattern playing out across the tech sector. Investors have priced in so much future growth that even good news isn’t good enough. And when Michael Burry reveals a $912 million bet against Palantir? That’s going to spook some people who’ve been riding the AI wave.
The executives are talking
When Goldman Sachs and Morgan Stanley CEOs both start warning about potential 10-15% drawdowns in the same week, you should probably listen. These aren’t doomsday prophets – they’re running the institutions that benefit from bullish markets. David Solomon’s comment about “none of us are smart enough to see them until they actually occur” is particularly telling.
It’s not just about AI valuations either. Barclays strategist Emmanuel Cau pointed to “fatigue after a very strong run” plus concerns about a potential US government shutdown. So you’ve got multiple catalysts converging at once. The market’s been climbing a wall of worry for months, and now the wall’s getting steeper.
This wasn’t just a tech story
While AI companies took the hardest hits, the sell-off spread much wider. Norwegian Cruise Line dropped 15% on disappointing revenues. Marathon Petroleum fell 5% after missing earnings expectations. Even bitcoin got swept up in the risk-off mood.
That’s what makes this interesting – when the pain spreads beyond the usual tech suspects, it suggests broader market concerns. Investors aren’t just questioning whether AI companies are overvalued. They’re questioning whether the entire market run has gotten ahead of itself. And with earnings season delivering mixed results, the confidence that’s been propping everything up is starting to look shaky.
Where do we go from here?
The big question is whether this is just a healthy correction or the start of something bigger. A 10-15% pullback after the massive run we’ve seen would actually be pretty normal market behavior. The problem? Normal hasn’t been normal for a while.
Look, AI isn’t going away. The technology is real and transformative. But the stocks? They might need to catch their breath. When even good news can’t push prices higher, you know the easy money has been made. Now we’ll see if the AI revolution can actually deliver the profits to justify these valuations. My guess? It’s going to be a bumpy ride.
