On the 25th (local time), the New York stock market fell for a second straight day. Investor sentiment froze as major tech stocks that had led the AI rally, including Nvidia and Oracle, faced concerns about overvaluation.
On the New York Stock Exchange (NYSE), the Dow Jones Industrial Average ended down 160 points, or 0.4%, from the previous session. The large-cap-focused Standard & Poor's (S&P) 500 index fell 0.4%, and the tech-heavy Nasdaq composite declined 0.5%.
The AI frenzy that recently heated up the market paused for a second day. Among investors, there is analysis that the valuations of AI-related stocks, which had surged, have reached a burdensome level. Jerome Powell, chair of the U.S. Federal Reserve (Fed), also recently assessed that stock values are quite high.
Shares of Nvidia, the leading AI chip maker, fell nearly 1% on the day, extending the previous day's decline. This came despite news that Nvidia signed a $100 billion partnership with OpenAI, as market skepticism grew over the AI industry's cyclical investment structure. Rival Oracle also fell more than 2% for a second day.
Memory semiconductor company Micron Technology also dropped 2% as its results and outlook failed to meet market expectations. It is read as a signal that investor confidence in AI-related transactions remains less than solid.
Some individual stocks, however, rose on company-specific positives. Intel jumped more than 6% after news that Apple is considering an investment. Chinese e-commerce corporations Alibaba also soared more than 8% after unveiling plans to expand investment in AI models and development.
Experts said that while tech stocks are undergoing a correction, the overall market is not in danger.
Jay Hatfield, chief executive officer (CEO) of Infrastructure Capital Advisors, told CNBC that "tech stocks have risen somewhat excessively," adding, "This is a clear valuation problem."
Craig Johnson of Piper Sandler said, "The strong uptrend is not over yet," while adding, "As prices keep rising, the short-term risk-reward structure is compressing."
Investors remain on guard as they watch economic indicators such as the potential for a federal government shutdown ahead of the 30th deadline and the soon-to-be-released personal consumption expenditures (PCE) price index.