Global stocks fell sharply on Tuesday as concerns about soaring valuations and an uncertain macro environment hit investors. Nvidia This week’s earnings.
Bread is-Europe Stoxx 600 Tuesday’s trading started in negative territory, with mining stocks and banks leading European losses. The Stoxx Europe 600 Technology Index fell 1.4%, tracking U.S. stocks, as fears of an artificial intelligence bubble persist.
The three major U.S. indexes, the Dow Jones Industrial Average, S&P 500, and tech-heavy Nasdaq Composite, ended the previous session in the red. Asia-Pacific markets also fell on Tuesday due to declines in benchmark indexes in Japan and South Korea.
Mike Gallagher, research director at Continuum Economics, said market movements suggest stocks could fall about 5%, or “a little more”, from their recent highs.
He told CNBC’s “Squawk Box Europe” that the sell-off was “natural profit-taking” after the market’s strength since April.
Interactive chart showing the European Stoxx 600 index
All of this comes against the backdrop of AI bubble concerns and the market’s strong performance on Nvidia’s third-quarter results, which will be released after the close of trading on Wednesday. Nvidia is considered a key leader in the AI industry, as many of the largest companies rely on Nvidia’s GPUs.
Recent earnings seasons show big hyperscalers still have plenty of money to make in 2026-27, Gallagher said, adding that investors are paying attention. meta Because without the server business, it will be an indicator of whether the next wave of AI applications can bring in revenue. “This suggests that this is just a routine sound correction,” he said.
Yuri Khojamilian, chief investment officer at Tema ETF, said the recent sell-off was due to “healthy skepticism” as the market realized that the mega-deals announced over the summer actually needed to be funded in some way. He noted that OpenAI has “announced a ton of commitments around spending on GPUs and power data centers,” and said “the market is starting to realize that this may be a slower process than we thought in the summer.”
“There is this kind of rebalancing happening in the market and this is what we are seeing in some stocks. oracle‘s stock price has returned to pre-OpenAI announcement levels, which we think is quite healthy. Whether we listen to you or not, the dynamics will continue and these data centers will be built. microsoftMeta, Nvidia, etc. are all trending upwards. Nothing has really stopped, so what we’re seeing is, in a sense, just a healthy correction in the market,” Khojamilian told CNBC’s Sylvia Amaro.
Some large technology companies alphabet and Mehta have turned to bond issuance to fund their vast AI ambitions. For example, Amazon has conducted its first bond sale in three years, according to a report from Bloomberg.
“There’s increasing evidence of vendor financing and credit market development, but I think it’s still relatively early stage,” David Grauman, global equity strategist at Citi, told CNBC’s “Squawk Box Europe.”
Bond markets will have to adjust and respond, “spreads need to widen a little bit more, dramatically,” Gallagher added. “We haven’t seen any significant widening in corporate bond spreads,” he added.
Grauman said Citi has a “bear market checklist” to determine whether the conditions necessary for a long-term, sustained decline in global stocks are in place. We examine 18 factors including valuation, sentiment, and positioning on a rolling three-year basis.
“What that tells us is that maybe 8 out of 18 are flashing red. On a valuation basis, 2000 looks like the past in some ways, but given a number of other factors such as equity inflows, M&A activity, IPO activity, there aren’t necessarily any signs of real frothiness,” he said, adding that equity inflows “are still quite subdued over the long term, so it’s still a time to buy the bullshit.” Run on the horizon. ”
However, Gallagher noted that there is an element of risk aversion in an uncertain macro environment. He said investors are uncertain about the previously expected December Fed rate cut, adding that the Fed will “probably” stop cutting rates in the first quarter of 2026.
“Then, all of a sudden, those kinds of drivers that were driving the risk are no longer there. We also have the Supreme Court of the United States to decide on President Trump’s reciprocal tariffs. It’s really a 50-50 decision whether half or all of the tariffs are suspended, and then we’re back to the April cycle drama over new types of tariffs,” Gallagher said.
“That means there are things coming over the horizon that make you want to take a little bit of a risk. So some of it is just natural pocket-taking, and part of it is thinking, ‘Will the macro story be perfect? No, it’s not.'”
“We might need some serious bad news to get a big selloff, but we’re really not there yet,” Gallagher said.
He added that there is some hype around cryptocurrencies due to leverage. Bitcoin is down about 25% from its October high, and Ether is down 35% from its August high. Industry experts told CNBC that the sector is facing pressure from both early macro-driven sales and forced liquidations.
Mr. Khojamilian takes a multi-year perspective. The CIO said one of the pressing issues is access to electricity. “Management teams in the U.S. and around the world are recognizing that they need to power these data centers. This is going to be a huge problem and could delay the build out because more power needs to be built,” he said.
“We think this is the biggest problem and the biggest bottleneck in building the AI revolution, but also rebuilding the industrial base in both Europe and the US, electric vehicles, digital currencies, etc.,” he added.
