A wave of selling swept through global financial markets this week, driven by growing unease over the soaring valuations of companies at the forefront of the artificial intelligence boom. The sharp downturn marks a significant pullback from recent record highs and reflects mounting warnings from top financial executives.
Major indices in the United States led the decline. The technology-heavy Nasdaq Composite fell 2%, its steepest single-day drop in nearly a month, dragged down by losses across the sector. The broader S&P 500 index also closed down more than 1%. The sell-off notably impacted leading AI-related firms, with significant one-day declines reported for major players including Nvidia, Microsoft, and Meta.
The mood turned particularly sour around data analytics firm Palantir. Its shares tumbled nearly 8% despite a positive business update, a move exacerbated by prominent short-seller Michael Burry taking a bearish position against it and Nvidia. Palantir’s CEO publicly criticized such bets, arguing they undermine confidence in the AI sector’s transformative potential.
The anxiety quickly spread to Asian and European exchanges. Markets in Japan and South Korea retreated sharply from their peaks, while indices in London, Paris, and Frankfurt opened lower. The downturn coincided with cautionary statements from the heads of major investment banks, who have begun voicing concerns that a broader market correction may be imminent. Their warnings echo similar recent comments from other Wall Street leaders.
Analysts point to a fundamental concern: the immense capital flowing into AI is heavily concentrated in a handful of firms, with tangible returns for the broader market yet to be proven. This concentration risk, coupled with stretched valuations, has prompted a “risk-off” shift among investors.
The flight from risk was also evident in cryptocurrency markets. Bitcoin briefly fell below the $100,000 threshold for the first time in months, extending a decline from its October peak and posting its worst monthly performance in a decade as capital sought safer havens.
This market turbulence underscores a pivotal moment of reassessment, as the initial euphoria surrounding artificial intelligence gives way to more sober questions about sustainability and value.