Wall Street stocks slide as tech jitters return

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Technology stocks led a decline in US stocks as growing concerns about highly valued companies collided with growing doubts about whether the Federal Reserve will cut interest rates next month.

The Nasdaq Composite Index, dominated by technology stocks, closed down 2.3 percent, and the S&P 500 lost 1.7 percent. Asian markets followed the United States’ lead in decline in early trading, with Japan’s Nikkei 225 index falling 1.7 percent and South Korea’s Kospi index falling 2.2 percent.

The Nasdaq rose more than 50 percent between early April — when stocks rebounded from a selloff sparked by president Donald Trump’s tariffs — and late October as investors bet that artificial intelligence will ignite a sustained period of huge growth in the technology sector.

But the index has fluctuated over the past two weeks, as a growing number of investors have drawn comparisons between the strong rise in artificial intelligence stocks and the ill-fated technology boom at the turn of the millennium.

“We see a growing risk that the imbalances that built up in the 1990s will become more pronounced as the AI ​​investment boom expands,” Goldman Sachs analysts Dominic Wilson and Vicky Chang said in a note to clients.

Concerns that market valuations were becoming unaffected by fundamentals helped prompt investor Michael Burry, known for betting against the US housing market before the 2008 financial crisis, to announce he would close his hedge fund Scion Asset Management.

“My estimate of the value of securities is not now, and has not been for some time, in sync with the markets,” he said in an October 27 letter to investors.

Thursday’s decline in stocks was also accompanied by a decline in the US government bond market, due to declining prospects for the Federal Reserve to cut interest rates in December, after two quarter-point cuts in recent months. The yield on two-year US Treasury bonds, which is sensitive to interest rate expectations, rose 0.03 percentage point to 3.59 percent. Bond yields move inversely with prices.

Shares in fast-growing companies, such as technology stocks, are seen as particularly vulnerable to shifts in price expectations.

Technology stocks that have pushed the US stock market to record highs in recent months bore the brunt of the selling pressure, with shares of Nvidia, Broadcom and Intel falling more than 3 percent.

Retail brokerage firm Robinhood lost 8.7 percent, Elon Musk’s electric car company Tesla fell 6.6 percent, and defense contractor Palantir fell 6.5 percent.

Artificial intelligence data center operator CoreWeave, which earlier this week revealed annual revenue forecasts that beat Wall Street estimates, fell more than 8 percent, bringing its decline over the past month to nearly 45 percent.

“It’s part of the digestive process that the market is going through… where this year’s leaders are taking a step back while the rest of the market is catching up,” said Kevin Gordon, head of macro research at Charles Schwab.

“Higher value sectors of the market tend to be the hardest hit initially when volatility around extended multiples starts creeping back in,” he added.

The declines in stock and bond markets came a day after Trump ended the longest US federal government shutdown, which deprived investors of vital economic data as concerns about the state of the labor market began to grow.

In the absence of headline numbers, Fed Chairman Jay Powell warned last month that a December interest rate cut was “far from being” a foregone conclusion.

Boston Fed President Susan Collins on Wednesday cast more doubt on an interest rate cut next month, saying there was a “relatively high bar for additional easing in the near term.”

Investors expect a roughly 50 percent chance that the US central bank will cut interest rates when it meets next month. The quarter-point cut was fully priced in by the market three weeks ago.

Raphael Thoen, head of capital markets strategies at Tikehau Capital, said the market was “probably a little ahead of its skis” due to expectations of Fed cuts.

Additional reporting by William Sandlund in Hong Kong and Ian Smith in London