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NEW YORK — Wall Street’s long-running infatuation with artificial intelligence hit another pause on Tuesday as investors pulled back from big technology names, sending the S&P 500 and Nasdaq into the red amid renewed doubts about whether AI’s profits can justify its price.
The S&P 500 slipped 0.2% and the Nasdaq Composite dropped 0.7%, reversing Monday’s rally that had briefly restored optimism across technology stocks. The Dow Jones Industrial Average rose 0.6%, supported by energy and healthcare gains, but the day’s market narrative centered on one question: has AI grown too big, too fast?
The retreat began with a surprise move by Japan’s SoftBank Group, which disclosed the sale of its entire Nvidia stake for $5.83 billion. The exit, coming from one of AI’s most vocal early champions, sparked unease among investors who have treated Nvidia as the standard-bearer of the artificial intelligence revolution. Nvidia shares fell 3.7% by midday.
Adding to the unease, cloud-computing startup CoreWeave — backed by Nvidia — cut its annual revenue forecast, citing data-center disruptions. Its shares tumbled more than 12%, dragging down related chipmakers and infrastructure firms. “There’s a little bit of weakness across AI headlines — nothing catastrophic, just cracks in the armor,” said Ross Mayfield, an investment strategist at Baird. “These are still great companies, but valuation discipline has to return.”
Technology stocks were the biggest drag on the S&P 500, slipping 1.2%. The Philadelphia Semiconductor Index fell 2%, while health and energy stocks gained ground. Shares of Eli Lilly, Merck, and Amgen climbed between 2% and 3.5%, buoying the healthcare sector by 1.6%.
Investors also parsed weak labor data, with private employers reportedly shedding an average of 11,000 jobs per week through late October, according to payroll estimates. Combined with the effects of the now six-week U.S. government shutdown, the data added to the uncertainty clouding near-term growth.
The shutdown itself appeared to be nearing a resolution. The Senate approved a stopgap spending deal on Monday night, and the House was expected to vote Wednesday to reopen the government. Betting markets fully priced in a reopening this week. President Donald Trump has pledged to sign the measure, saying, “We’re opening up our country. Should have never been closed.”
Still, with air travel disrupted, food aid delayed, and government contractors on hold, the impact of the fiscal paralysis has already seeped into consumer sentiment and spending expectations. “This is not just a political issue anymore — it’s an economic one,” said Morgan Adams, chief strategist at Granite Capital. “Markets are looking for stability, and that’s hard to price in when government operations are off balance.”
Beyond politics, investors are increasingly grappling with the shape of AI’s financial reality. The sector’s rapid rise has been fueled by enthusiasm for transformative potential — from generative algorithms to industrial automation — but analysts have begun to question whether earnings can keep pace with trillion-dollar valuations.
Last week’s market correction saw major AI players lose more than $250 billion in combined market capitalization. That dip came even as corporate investment continues to pour into the sector: Paramount Skydance rose nearly 10% after announcing a $1.5 billion expansion into streaming and studio production, signaling that traditional media firms still see AI-enhanced operations as a path forward.
At the same time, the energy sector quietly strengthened. Occidental Petroleum beat third-quarter profit expectations, adding 2.8% to its share price and lifting the S&P 500 energy index by 1.6%. Investors rotated modestly into oil and gas equities as a hedge against tech volatility.
For all the turbulence, market breadth remained positive. On the New York Stock Exchange, advancing issues outnumbered decliners by a 1.6-to-1 ratio, while the Nasdaq maintained a narrow margin of gainers. The S&P 500 recorded 22 new 52-week highs versus two new lows.
Yet sentiment remains fragile. “AI is the growth story of the decade,” Mayfield added, “but that doesn’t mean it’s immune to gravity. The market needs time to digest how profits will actually materialize.”
As bond markets remained closed for the Veterans Day holiday, trading volumes were light. Analysts expect volatility to persist through the week as investors digest both the potential government reopening and fresh inflation data.
In the meantime, Wall Street is learning a familiar lesson in a new technological age — that even the most revolutionary ideas must eventually meet the discipline of fundamentals.
