US markets fell on Tuesday as artificial intelligence-linked shares extended recent declines amid growing concern that valuations have run ahead of earnings. The S&P 500 dropped 1.17% to 6,771.55, the Nasdaq slid 2.04% to 23,348.64, and the Dow Jones Industrial Average lost 0.53%.
Palantir fell 8% even after reporting stronger-than-expected third-quarter results and guidance driven by AI demand. The stock has risen more than 150% this year and now trades at over 200 times forward earnings, prompting caution from investors seeking clearer evidence of sustainable profit growth. Oracle fell 4%, AMD nearly 4%, and other large-cap technology names including Nvidia and Amazon also retreated.
According to FactSet data, the S&P 500’s forward price-to-earnings ratio has risen above 23, its highest level in more than two decades.
Market strategists highlight stretched conditions
Market strategists noted that valuations in the technology sector have become increasingly stretched after months of uninterrupted gains. Investors are weighing whether the strong pace of capital expenditure by major tech firms will translate into proportionate profit growth over the coming year. The lack of meaningful pullbacks since April has added to expectations of an eventual correction as sentiment turns more cautious.
Wall Street leaders flag correction risk
Comments from senior US banking executives added to the downbeat tone. Goldman Sachs chief executive David Solomon said a 10–20% drawdown in equity markets over the next two years was likely, while Morgan Stanley’s Ted Pick described similar declines as a healthy adjustment after the rapid rise since April. Analysts said fundamentals remain solid but warned that a short period of consolidation or a moderate correction could help ease valuation pressures.
ASX outlook
Australian shares are set to open slightly higher, with ASX 200 futures up 18 points, or 0.2%, to 8830. CSL and Woodside Energy will both hold investor days, Challenger Financial is expected to deliver a market update, and Goodman Group will release a quarterly report.
Internationally, investors will monitor New Zealand’s employment figures, the Bank of Japan’s meeting minutes, China’s October services data, and Sweden’s policy announcement.
