US benchmark equity indexes fell after warnings of a correction from major Wall Street banks coincided with concern that the valuation of so-called AI trade beneficiaries is lofty.
The Nasdaq Composite dropped 1.5% to 23,476.8, with the S&P 500 down 0.9% to 6,788.6, and the Dow Jones Industrial Average 0.5% lower at 47,114.4. Technology, communication services, and consumer discretionary led the decliners intraday.
Wedbush Securities maintained its outperform rating on Palantir's (PLTR) stock following market-beating Q3 results overnight, viewing it as "one of the (artificial intelligence) tech stalwarts over the next decade," according to a Tuesday client note.
For 2025, Palantir expects revenue of $4.396 billion to $4.400 billion, compared with its previously set guidance of $4.14 billion to $4.15 billion and market expectations of $4.14 billion. The company's price-to-sales ratio is estimated to be 85, as per a Bloomberg TV report. Shares of Palantir dropped 7%, the steepest decline on the S&P 500 and the Nasdaq.
"Investors questioned lofty valuations in the technology sector after major Wall Street banks warned of a possible selloff and Palantir's subdued sales forecast dampened sentiment around artificial intelligence plays," a research note from D.A. Davidson said early Tuesday.
The Global X Artificial Intelligence & Technology ETF (AIQ), with net assets of $5.98 billion, dropped 2.9%.
"We should welcome the possibility that there would be drawdowns, 10% to 15%, that are not driven by some sort of macro cliff effect," Reuters reported Morgan Stanley Chief Executive Ted Pick as saying at the Global Financial Leaders' Investment Summit in Hong Kong.
"When you have these cycles, things can run for a period of time. But there are things that will change sentiment and will create drawdowns, or change the perspective on the growth trajectory, and none of us are smart enough to see them until they actually occur," Goldman CEO David Solomon was cited as saying in the Reuters news report.
