Wall Street stumbled on Tuesday as Big Tech stock losses erased early-week gains, sending major U.S. indexes tumbling. The selloff came amid renewed worries that the U.S. Federal Reserve may delay its next interest rate cut, raising doubts about the sustainability of this year’s tech-driven rally.
The S&P 500 dropped 1.2%, while the Dow Jones Industrial Average fell 431 points, or 0.8%. The Nasdaq Composite, heavily weighted toward technology companies, plunged 1.7% — its sharpest single-day drop in weeks.
AI Leaders Palantir and Nvidia Lead the Decline in Big Tech
Among the hardest hit was Palantir Technologies (NYSE:PLTR), which sank 10% despite posting better-than-expected quarterly earnings. The data analytics company has been one of 2025’s standout performers, soaring over 170% this year on enthusiasm surrounding artificial intelligence (AI). But even strong results couldn’t offset investor concerns about sky-high valuations.
Nvidia (NASDAQ:NVDA) — the market’s AI darling — also reversed course, sliding 2.8%. The chipmaker has seen its market cap balloon past $2 trillion thanks to surging demand for GPUs that power AI applications. However, analysts warn that investor expectations may have outpaced reality.
“Valuations in AI and semiconductor stocks are beginning to stretch,” said Shrikant Kale, strategist at Jefferies Hong Kong. “Markets are pivoting from mean reversion to pure momentum — a dynamic that rarely ends smoothly.”
Amazon and Tesla Add to the Downturn
Amazon (NASDAQ:AMZN) fell 1.3% after rallying Monday on news of a $38 billion cloud deal with OpenAI. The e-commerce and cloud giant remains a key beneficiary of AI infrastructure spending, but investors appear cautious as growth in the cloud sector moderates.
Tesla (NASDAQ:TSLA) dropped 2.7% following reports that Norway’s sovereign wealth fund — one of the automaker’s largest shareholders — will vote against CEO Elon Musk’s proposed $1 trillion pay package. The vote, set for Thursday, has split investors and reignited debates over executive compensation.
Tesla’s performance has also been under pressure from cooling electric vehicle demand and tightening global competition, particularly from Chinese automakers.
Rising Fed Uncertainty Hits Risk Assets
Investors’ growing unease stems largely from shifting expectations for Federal Reserve policy. With inflation still running above the Fed’s 2% target, policymakers appear less eager to deliver another rate cut this year.
“I am nervous about the inflation side of the ledger,” said Austan Goolsbee, President of the Federal Reserve Bank of Chicago, in a recent Yahoo Finance interview. “Inflation has been above target for four and a half years — and it’s trending the wrong way.”
Fed Governor Lisa Cook added that “every meeting, including December’s, is a live meeting,” reinforcing that future decisions will depend on incoming data.
Higher interest rates tend to weigh heavily on tech companies, which rely on cheap credit to fuel rapid growth. As a result, even a small shift in rate expectations can trigger broad market selloffs in growth sectors.
Global Markets Follow Wall Street’s Lead
Overseas markets mirrored the U.S. downturn. Europe’s CAC 40 in France fell 1.3%, Germany’s DAX dipped 1.5%, and Britain’s FTSE 100 slid 0.8%. In Asia, Japan’s Nikkei 225 dropped 1.7% after reopening from a holiday, while South Korea’s Kospi tumbled 2.4%.
Meanwhile, energy prices also weakened. U.S. benchmark crude declined to $60.20 a barrel, and Brent crude slipped to $64.10.
Outlook: Short-Term Volatility Ahead
Despite the pullback, analysts note that the broader uptrend in AI and tech remains intact. However, Big Tech stock losses like those seen Tuesday highlight growing market fragility amid high valuations and policy uncertainty.
Investors are watching closely to see whether inflation cools enough to prompt the Fed’s next rate cut — a move that could help stabilize growth stocks like Nvidia, Palantir, and Tesla.
Until then, Wall Street’s rally appears to be losing some of its shine.
Featured Image: Freepik
