Wall Street’s primary indices showed a lackluster performance at the start of trading on Wednesday, following a decline in the technology sector in the previous session due to escalating concerns about valuations. The Dow Jones Industrial Average edged up by 0.03% to 47,097.31, the S&P 500 decreased by 0.03% to 6,769.77, and the Nasdaq Composite rose by 0.04% to 23,358.075 when the market opened.
The selling pressure continued for a second consecutive day on Wednesday in global markets, with stock prices in Seoul and Tokyo dropping by approximately five percent from the peaks reached on Tuesday. Although the technology sector experienced declines in stock prices the day before, brokers and investors remain cautious but not overly alarmed, given the market’s recent surge to record highs and some stretched valuations.
Among the most impacted were the top performers of the rally, notably chipmaker Nvidia, which has rapidly ascended to become the world’s most valuable company. Analysts like Jon Withaar, a senior portfolio manager at Pictet Asset Management in Singapore, attributed the recent selloff to positioning-driven movements, with previously outperforming stocks bearing the brunt of the decline.
The downturn seemed to lack a clear trigger, initially sparked by a negative market reaction to strong financial results from Silicon Valley’s Palantir Technologies, a data and artificial intelligence firm. Shares of Palantir dropped nearly eight percent on Tuesday and continued to decline by three percent in after-hours trading.
Herald van der Linde, HSBC’s head of equity strategy for Asia Pacific, expressed concerns over the excessive focus on AI stocks, questioning the sustainability of their upward trajectory. The market sentiment reflected broad-based selling in riskier segments, indicating short-term profit-taking activities, according to Angus McGeoch, Barrenjoey’s head of equities distribution for Asia.
While fears of an AI bubble loom amidst market uncertainties, Wall Street leaders and prominent investors have voiced apprehensions about the sustainability of the artificial intelligence boom. Michael Burry, known for predicting the U.S. housing bubble, has taken positions against Nvidia and Palantir, adding to concerns about a potential market bubble.
As market participants await the U.S. Supreme Court’s hearing on tariff legality, some investors like Matthew Haupt from Wilson Asset Management in Sydney see the recent market downturn as an opportunity to reallocate investments, anticipating potential market movements.
