Global stock markets have fallen sharply amid concerns that the rapid rise in valuations of artificial intelligence (AI) companies could quickly give way to a downturn.
Markets in the U.S., Asia and Europe declined after top banking executives warned of a likely major correction. A string of record highs, they said, has led to the overvaluation of certain companies.
On Tuesday, the Nasdaq and S&P 500 recorded their steepest one-day drop in almost a month. Technology stocks dragged the Nasdaq down, closing 2% lower. All seven major AI-related companies—Nvidia, Amazon, Apple, Microsoft, Tesla, Alphabet (Google’s parent company) and Meta (owner of Facebook, Instagram and WhatsApp)—also saw declines.
The S&P 500 fell just over 1%, driven mainly by the slide in technology shares. Palantir stood out: despite having raised its revenue outlook the day before, its stock plunged nearly 8%.
Palantir also drew attention from prominent speculators. Investor Michael Burry, who gained fame after the 2008 financial crisis and inspired the protagonist of The Big Short, bet against Palantir and Nvidia—two of the biggest players in the AI sector. The move sparked a sharp reaction from Palantir CEO Alex Karp and a subsequent sell-off. In an interview with CNBC, Karp accused Burry and other short-sellers of “trying to undermine the very idea of an artificial intelligence revolution.”
Asian markets continued their decline on Wednesday, posting their steepest drop in seven months: indexes in Japan and South Korea fell more than 5% compared with the record highs of the previous day. In Europe, Wednesday morning also began with modest losses in the United Kingdom, France and Germany.
The downturn followed warnings from Morgan Stanley and Goldman Sachs executives about a potential correction. They were joined by JPMorgan Chase CEO Jamie Dimon, who had already said in October that he feared a market collapse within the next six months to two years.
Deutsche Bank analyst Jim Reid noted that “an increasing number of voices are asking whether we might be approaching a correction in the stock market.” According to him, “the past 24 hours have shown a clear shift away from risk as concerns over inflated tech valuations have weighed on market sentiment.”
Some analysts also point to the fragility of investment in the AI sector: most of the capital is concentrated in the hands of a small group of companies—chiefly OpenAI and Nvidia—while the actual returns so far remain minimal.
Against this backdrop, Bitcoin briefly fell below $100,000 for the first time since June, as investors pulled back from riskier assets amid growing fears about the economic outlook. The cryptocurrency, which hit a record high of over $126,000 in early October, ended the month down 3.7%—its worst monthly performance in a decade, according to CoinMarketCap data.