According to Fortune, U.S. stocks followed Asian and European markets lower on Tuesday amid growing fears that Nvidia and other high-flying tech stocks are overvalued. The S&P 500 fell 0.8%, pulling further from its all-time high set late last month, while the Dow Jones Industrial Average lost 498 points and the Nasdaq composite sank 1.2%. Nvidia dropped 2.8%, bringing its loss for the month so far to more than 10% – officially a correction by Wall Street standards. Bitcoin briefly fell below $90,000, down from nearly $125,000 last month, and Home Depot plunged 6% after reporting weaker-than-expected summer profits. The selloff comes as 45% of fund managers in Bank of America’s latest survey identified an AI bubble as the market’s number one risk.
The Nvidia reality check hits hard
Here’s the thing about Nvidia‘s correction – it’s not just about one stock anymore. When you’re the most influential stock on Wall Street with a market cap that briefly topped $5 trillion, your problems become everyone’s problems. Nvidia single-handedly steers the S&P 500 some days, which means its 10% monthly decline is pulling down millions of 401(k) accounts across the country. The company’s price more than doubled in four of the last five years, and that kind of exponential growth was bound to hit a wall eventually. Now all eyes are on Wednesday’s profit report, which could either stop the bleeding or make it much worse. Basically, we’re about to find out if the AI revolution can actually deliver the profits to match the hype.
Those AI bubble warnings are getting louder
When 45% of global fund managers point to an AI bubble as their biggest fear, you should probably pay attention. That’s exactly what Bank of America’s latest survey found, with AI concerns beating out potential trouble in the bond market, inflation, and even trade wars. And get this – a record percentage of investors now say companies are “overinvesting” in AI. They’re worried that all those billions pouring into AI chips and data centers might not produce the revolutionary profits everyone’s banking on. It’s starting to feel like déjà vu from previous tech bubbles. Remember when everyone was certain the metaverse would change everything? Now we’re hearing similar promises about AI, and the market is getting nervous that reality might not match the hype.
It’s not just tech feeling the pain
While Nvidia’s correction dominates the headlines, the market troubles run much deeper. Home Depot’s 6% plunge shows this isn’t just a tech problem – it’s hitting traditional sectors too. The company cited a “lack of storms” hurting sales, which honestly sounds like something out of a corporate bingo card. But their CEO also pointed to “consumer uncertainty and continued pressure in housing,” which are much more concerning trends. Meanwhile, bitcoin’s wild ride continues with its drop from $125,000 to below $90,000 before recovering slightly. And Cloudflare fell 2.8% after causing global outages for ChatGPT and other services. When even the infrastructure supporting AI stumbles, it makes you wonder how solid this whole ecosystem really is.
So what happens now?
The Federal Reserve is stuck between a rock and a hard place here. They’ve cut rates twice this year to support a slowing job market, but inflation remains stubbornly above their 2% target. Treasury yields have been swinging wildly as traders doubt whether we’ll see another rate cut in December. Lower rates have been fueling this bull market, and if that support disappears, we could be in for more pain. Overseas markets aren’t helping either – South Korea’s Kospi sank 3.3%, Japan’s Nikkei dropped 3.2%, and France’s CAC 40 fell 1.9%. This is becoming a global concern, not just a U.S. problem. The question isn’t whether we’re in a correction – we clearly are. The real question is whether this is just a healthy pullback or the start of something much bigger.
