[New York Stock Exchange] Broad Decline Amid Nvidia Earnings Jitters... Tech Sell-Off Accelerates on 'AI Bubble' Fears

S&P 500 Declines for Fourth Consecutive Session
AI-Related Stocks Including Nvidia, Amazon, and Microsoft Weaken Together
Focus on Nvidia Earnings and Employment Report Announcements This Week

On November 18 (local time), all three major indices on the New York Stock Exchange closed lower. As concerns about an artificial intelligence (AI) investment bubble intensified, investor sentiment weakened and technology stocks continued their downward trend. With a stronger preference for safe-haven assets, U.S. Treasury prices rose slightly, while Bitcoin weakened and at one point fell below $90,000.

On the 18th (local time), traders are working on the trading floor of the New York Stock Exchange (NYSE) in the United States. Photo by UPI

On this day, the Dow Jones Industrial Average, which focuses on blue-chip stocks, closed at 46,091.74, down 498.5 points (1.07%) from the previous session. The S&P 500, which tracks large-cap stocks, fell 55.09 points (0.83%) to 6,617.32, while the tech-heavy Nasdaq dropped 275.229 points (1.21%) to 22,432.846. Notably, the S&P 500 declined for the fourth consecutive session, marking its longest losing streak since August.

By stock, Nvidia dropped 2.81%. The previous day, it was revealed that Thiel Macro Fund, led by billionaire investor Peter Thiel, co-founder of PayPal and Palantir, had sold all of its Nvidia shares. This disclosure fueled concerns that the AI investment cycle may have peaked. Amazon fell 4.43%, and Microsoft (MS) declined 2.7%. Palantir and Broadcom also dropped by 2.29% and 0.63%, respectively. Home Depot plummeted 6.02% due to poor performance in its home improvement division and a downward revision of its annual outlook.

Concerns about an overheated AI investment market persist. On this day, both Microsoft and Nvidia announced a combined $15 billion investment in AI startup Anthropic, but this was insufficient to quell widespread fears of an AI bubble. Analysts note that worries about tech stock overvaluation and a series of corporate bond issuances by major tech companies are fueling anxiety about the fundamentals of AI.

Sundar Pichai, CEO of Alphabet, Google's parent company, said in a BBC interview released on this day, "There is a certain degree of irrationality in today's AI boom," adding, "When the bubble bursts, no company will be immune."

Sonu Varghese, Vice President and Global Macro Strategist at Carson Group, pointed out, "Whether we are in a bubble is not the issue. The real question is how long the current AI spending trend will last and how severe the aftermath will be when it ends."

As risk appetite waned, Bitcoin fell below $90,000 at one point during the day. This represents a significant drop from the all-time high of $126,000 recorded in early October.

The market's main focus is Nvidia's third-quarter earnings, which will be announced after the market closes on November 19. Amid growing controversy over the overvaluation of AI-related stocks, these results are expected to serve as a key inflection point for the direction of the stock market. Nvidia has already fallen more than 10% so far this month.

Sam Stovall, Chief Investment Strategist at CFRA, commented on the S&P 500 outlook, saying, "By the time everything is settled, an 8-9% correction is possible. However, if Nvidia delivers the kind of earnings our analysts expect and employment indicators do not suggest a recession, the correction could end more quickly."

Attention is also focused on the minutes of the October Federal Open Market Committee (FOMC) meeting, which will be released on the same day. The U.S. Federal Reserve cut its benchmark interest rate by 0.25 percentage points at each of the last two meetings due to concerns about slowing employment, but there are differing opinions among Fed officials regarding the rate path for December. The upcoming minutes are expected to provide a clearer picture of the Fed officials' economic and interest rate outlooks.

Michael Hartnett, Chief Investment Strategist at Bank of America (BofA) Merrill Lynch Global Research, said, "If there is no rate cut next month, the market will face further correction," adding, "Current positioning is acting as a headwind, not a tailwind, for risk assets."

On November 20, the nonfarm payroll report for September will be released. The government shutdown (Shut Down - temporary work stoppage) that began on October 1 lasted a record 43 days, delaying the release of the September and October employment reports. With the abrupt end of the shutdown on November 12, previously unreleased inflation and employment indicators are expected to be announced sequentially. However, the October employment report is expected to omit the unemployment rate due to disruptions in data collection.

U.S. Treasury yields remained steady. The benchmark 10-year U.S. Treasury yield, a global bond market benchmark, was down 1 basis point (1bp = 0.01 percentage point) from the previous day at 4.11%, while the 2-year U.S. Treasury yield, which is sensitive to monetary policy, was down 3 basis points from the previous day at 3.57%.