Wall Street is poised for losses before the opening bell on Tuesday as several technology companies that initially boosted the market are now retreating. In premarket trading, futures for the S&P 500 decreased by 1%, while the Dow Jones Industrial Average futures fell 0.6%. The Nasdaq futures experienced a more significant drop of 1.4%. This shift signals a potential reversal from the earlier gains seen at the start of the week.
One significant player in this downturn is Palantir Technologies, which saw its stock decline by 7% overnight despite reporting third-quarter earnings that exceeded Wall Street expectations. The company has benefited from the recent surge in artificial intelligence interest, with its shares rising an impressive 176% this year as of Monday’s close. Similarly, chipmaker Nvidia reversed course, falling 1.7% before the market opened.
In a notable development, Amazon shares, which soared on Monday following the announcement of a $38 billion agreement with OpenAI, fell by 1.3%. Critics have voiced concerns that the overall U.S. market, particularly AI stocks, may be overvalued, drawing comparisons to the dot-com bubble of 2000. There are also rising apprehensions regarding the Federal Reserve‘s stance on interest rates, as inflation remains above its 2% target, potentially impacting tech companies that heavily rely on credit for growth.
Another significant loss was reported by Getty Images, whose stock slumped by 8.2% following a ruling against it in a landmark copyright trial involving the generative AI industry. The company had sued Stability AI in a British court over intellectual property rights related to its extensive online library of images and videos. This case is a part of broader legal challenges faced by tech companies that utilize creative works to train AI systems.
Tesla also faced setbacks, with its stock tumbling by 2.7% after Norway’s sovereign wealth fund, a major investor, announced it would vote against a proposed compensation plan that could grant CEO Elon Musk up to $1 trillion over a decade. The upcoming annual meeting on Thursday is set to address more than a dozen company proposals, with Musk’s pay package drawing particular scrutiny.
Internationally, European markets reflected similar trends. France’s CAC 40 lost 1.3%, Germany’s DAX dipped 1.5%, and Britain’s FTSE 100 slid 0.8%. In Asia, Japan’s benchmark Nikkei 225 fell 1.7% to finish at 51,497.20, following a national holiday. Shrikant Kale, a strategist at Jefferies Hong Kong, noted that the Japanese market is shifting from mean reversion to momentum, with gains in AI and semiconductor sectors driving significant valuation changes.
Other Asian markets also experienced declines, with Australia’s S&P/ASX 200 shedding 0.9% to 8,813.70 and South Korea’s Kospi dropping 2.4% to 4,121.74, reversing recent record highs. Hong Kong’s Hang Seng index fell 0.8% to 25,952.40, while the Shanghai Composite lost 0.4% to close at 3,960.19.
In energy markets, U.S. benchmark crude oil prices fell by $0.85 to $60.20 a barrel, while Brent crude, the international standard, declined by $0.79 to $64.10 a barrel. The overall sentiment in the markets indicates a cautious outlook as investors weigh the implications of rising interest rates and potential overvaluation in the tech sector.
