Concerns over the high valuations of leading stocks in the bull market, particularly artificial intelligence-related shares such as Palantir (PLTR.US), led declines on Wall Street on Tuesday. The Nasdaq fell by more than 1%, with the Dow Jones Industrial Average dropping over 400 points at one point, representing a 0.9% loss. The S&P 500 Index declined 0.9%, while the Nasdaq Composite slid 1.3%, or 297 points.
Despite Palantir posting better-than-expected quarterly results and raising its full-year guidance, its shares still plunged 9%, making it the worst performer among the Nasdaq 100 components. Deutsche Bank strategist Jim Reid noted that investors were disappointed by the lack of visibility into the company’s 2026 outlook and highlighted concerns over elevated valuations.
Other AI stocks also came under pressure, with Oracle (ORCL.US) down 3% and Intel (INTC.US) falling 4%. AMD (AMD.US) and NVIDIA (NVDA.US) each dropped by 2%. AI-related stocks have driven the forward price-to-earnings ratio of the S&P 500 Index to exceed 23 times, nearing levels last seen during the dot-com bubble in 2000.
The "Magnificent Seven" stocks all ended lower, with Tesla (TSLA.US) leading the losses by shedding 3%.