Wall Street suffered a bruising selloff Tuesday, as mounting concerns about artificial intelligence valuations combined with delayed SNAP payments to trigger widespread selling across technology sectors that have powered the market’s 2025 rally. The S&P 500 declined 1.17% to close at 6,771.55, while the Nasdaq Composite traded down 2.04% to finish at 23,348.64 and the Dow Jones Industrial Average lost 251.44 points or 0.53% to 47,085.24.
Palantir shares shed about 8% even after the software company beat Wall Street’s estimates for the third quarter and gave strong guidance, fueled by growth in its AI business. The paradoxical selloff despite strong fundamentals demonstrates that investors have grown increasingly skeptical about valuations in artificial intelligence stocks. The stock, which has risen more than 150% this year, trades at more than 200 times forward earnings, meaning investors in that name and the other AI stocks expect the companies to keep ratcheting up their profit and revenue forecasts by large magnitudes in order to justify investors continuing to buy the shares.
Palantir CEO Alex Karp ranted against short-sellers, calling out specifically Michael Burry after a filing revealed the investor of The Big Short fame had bets against the AI software company as well as Nvidia at the end of the last quarter. Karp told reporters that the two companies Burry is shorting are the ones making all the money, which is super weird, adding that the idea that chips and ontology is what you want to short is crazy. When reached for comment, Burry declined to respond to Karp’s remarks.
A delay in food assistance payments to low-income Americans could lower consumer spending in November by as much as half a percentage point according to Bank of America. SNAP disbursements were nearly frozen this month due to the ongoing U.S. government shutdown, but a federal court ordered Trump’s administration to pay out at least half SNAP beneficiaries monthly allowances using Department of Agriculture contingency funds, however the disbursements are expected to be delayed, likely hurting consumer spending this month.
The SNAP payment crisis creates additional headwinds for consumer-facing companies already dealing with elevated costs and weakening demand as the government shutdown extends into its 35th day. Bank of America’s warning that consumer spending could decline by 0.5% in November suggests the shutdown’s economic impact is broadening beyond federal workers to affect the entire retail sector heading into the crucial holiday shopping season.
Risky assets slid, with tech stocks and cryptocurrencies bearing the brunt of the selling, after long-simmering concerns about lofty valuations were fanned anew by a chorus of Wall Street executives who warned investors to brace for a pullback. With the rally confined to fewer and fewer shares as sentiment and technical indicators showed signs of overheating, the chiefs of giants from Capital Group to Goldman Sachs Group Inc. and Morgan Stanley noted the possibility of a pullback as a healthy development.
Goldman CEO Solomon says 10% to 20% equities drawdown is likely, representing a significant warning from one of Wall Street’s most influential executives. Solomon’s public comments about potential correction legitimized concerns that many investors had harbored privately but hesitated to act upon while momentum remained positive. Conservative strategists note that when Goldman’s CEO publicly warns about declines, sophisticated clients typically reduce risk exposure regardless of whether they believe the prediction.
Bitcoin fell about 1% in pre-market action, with crypto-related shares tumbling as risk-off sentiment pushed bitcoin futures down 3%. Shares of stocks linked to crypto including Coinbase and Strategy were both down 2% in early trading. The cryptocurrency selloff demonstrates that digital assets remain correlated with technology stocks rather than behaving as independent safe-haven alternatives during equity market corrections.
Treasuries and the dollar both edged lower this morning, a sign that flight to safety isn’t necessarily a factor during this tech-fueled sell-off. Yesterday featured defensive sectors including health care and energy among the S&P 500 leaders, suggesting some investors might be looking for less volatile places to buy. The sector rotation suggests sophisticated investors are repositioning portfolios toward quality and income rather than panic-selling into cash.
Spotify shares popped more than 5% in premarket trading Tuesday after the music streaming service’s earnings and revenue for the third quarter topped Wall Street’s expectations. The company earned 3.28 euros per share on revenue of 4.27 billion euros for the period, beating the 1.97 euros per share and 4.23 billion euros that analysts surveyed by LSEG had estimated. The streaming giant’s strong results demonstrate that not all technology companies face valuation concerns, with Spotify benefiting from subscription revenue model that provides predictable cash flows.
Uber shares fell 4% before the bell even after the ridesharing company beat Wall Street’s third-quarter revenue expectations, illustrating the challenging environment where positive earnings reports fail to prevent selling pressure when investors decide to reduce exposure to high-valuation growth stocks. The market’s negative response to good news represents classic behavior during sentiment shifts that precede larger corrections.
Expedia soared 15% before the open after the company topped consensus for earnings and revenue and raised its fiscal 2025 revenue forecast above consensus views. Airbnb rose 4% ahead of the open after beating analysts’ revenue expectations and delivering a stronger-than-expected forecast. The divergent performance between travel platforms and pure technology stocks suggests investors are rotating toward businesses with more traditional revenue models and clearer paths to profitability.
Morningstar data as of October 31st, 2025 shows that valuation increases across their large-cap stock coverage well outpaced the amount that the index rose. Once again this earnings season, it’s been all about the AI arms race and the buildout boom to develop new facilities and platforms as fast as possible, with growth in spending on capital expenditures still accelerating, not only increasing in nominal terms but also increasing as a percentage of a company’s revenues.
Only six stocks comprised the preponderance of capitalization increases in October, with Alphabet’s fair value increased twice during the month for a total market capitalization increase of $1.2 trillion. Nvidia’s valuation increased by $800 billion after CEO Jensen Huang disclosed that the company expects $500 billion of cumulative sales in calendar 2025 and 2026. The extraordinary concentration of market gains in a handful of technology mega-caps creates vulnerability if these companies disappoint or investors lose confidence in artificial intelligence narratives.
The speculative and momentum sentiment that helped lift many tech shares—including some with no profits—appears to be fading a bit according to Nathan Peterson, director of derivatives research and strategy at the Schwab Center for Financial Research. The observation that unprofitable technology companies are losing momentum represents a healthy development from conservative investment perspective, though painful for momentum traders who chased speculative names.
Wall Street’s worst week in a month ends today with consumer sentiment and credit data that could provide more breadcrumbs for investors, with focus remaining on the D.C. shutdown and concerns about AI valuations that sent the tech-heavy Nasdaq Composite down almost 2% yesterday for the third major sell-off in the last few weeks. The clustering of multiple 2% declines suggests the market is experiencing rolling corrections within individual sectors rather than broad-based selling that would characterize full bear market conditions.
To read some parts of the financial press, the selloff was attributable either to the heads of Goldman Sachs and Morgan Stanley saying there would be a stock market correction, or a sudden bout of concern about the sustainability of the massive investments in artificial intelligence, with neither explanation making a lot of sense. It’s more likely that it’s simply been a good year, so why not lock in some profits on the mega-cap stocks that have driven the rally.
Conservative investors should recognize that profit-taking after extraordinary gains represents rational portfolio management rather than bearish capitulation signaling deeper problems. The S&P 500’s 14% year-to-date advance creates natural incentives for long-term investors to harvest gains and rebalance toward undervalued segments that lagged during the technology rally.
Dave Sekera, chief US market strategist for Morningstar, notes that analysts have been ratcheting the valuations on many stocks they cover, leading to the market trading at a slight 2% discount as of the end of October. The modest discount suggests that current prices may not be as stretched as critics suggest, though Sekera’s analysis depends on companies delivering the aggressive earnings growth that analysts forecast.
A risk-off week on Wall Street is drawing to a close, with some of the most-expensive areas of the market driving stocks lower while a renewed slide in crypto leaves the asset class barely up for 2025. The Nasdaq 100 is on track for its worst week since the April tariff-fueled tantrum when the index entered a bear market, drawing uncomfortable comparisons to the spring volatility that saw trillions wiped from equity values before markets recovered.
Equities fell on Friday with the S&P 500 set to halt a streak of three weeks of gains as a gauge of US consumer sentiment sank to a more than three-year low. The consumer confidence decline reflects mounting anxiety about the government shutdown’s impact on household finances and broader economic conditions, creating additional headwinds for retail stocks heading into the holiday shopping season.
While the US payrolls report was not released this Friday due to the shutdown, a survey conducted by 22V Research showed that a labor-market unwind is the biggest risk to trading. The absence of official employment data creates uncertainty that amplifies market volatility as investors lack reliable information about economic conditions. That explains why risk assets and bond yields have been unusually sensitive to any news data on that front.
The question facing investors as November begins is whether Tuesday’s selloff represents healthy consolidation within an ongoing bull market or the beginning of more serious correction that could extend for weeks. The combination of stretched valuations, narrowing breadth, warnings from Wall Street executives, and economic uncertainty from the government shutdown creates challenging environment where multiple bearish catalysts threaten the year-end rally many investors anticipated.
Despite the slide, flows remain supportive with US equity funds having an eighth consecutive week of inflows, the longest streak this year, but cash attracted the bulk of inflows according to Bank of America citing EPFR Global data. The shift toward cash suggests investors remain committed to equity exposure in principle but are raising defensive positioning rather than abandoning stocks entirely.
Traders are pondering a moment of weakness embedded in a multi-month rip higher for stocks, yet the market on balance looks poised for further gains according to Goldman Sachs’ Tony Pasquariello. I’m not saying that risk/reward is overly compelling, nor that this is an ideal location to add a bunch of incremental risk, the head of hedge fund coverage at Goldman Sachs wrote in a note to clients.
As November’s traditionally strong seasonal period begins with significant headwinds from valuation concerns and economic uncertainty, conservative investors face difficult choices between maintaining equity exposure during what could be temporary volatility or reducing risk ahead of potential deeper correction. The market’s ability to absorb Goldman CEO’s warning about 10% to 20% drawdown will determine whether bulls maintain control heading into year-end or whether long-anticipated correction finally materializes after the extraordinary gains that characterized most of 2025.
