Dow drops 400 points as AI stocks resume their decline, Nasdaq falls 2%: Live updates

U.S. stocks retreated on Thursday as companies that have benefited from the artificial intelligence trade came under pressure yet again amid concern about their eye-watering valuations.

The Dow Jones Industrial Average slid 485 points, or 1%. The S&P 500 traded down by 1.2%, while the Nasdaq Composite tumbled 2%. The Nasdaq 100 was down more than 2% since last Friday’s close and on pace for its worst week since early April. The biggest downside impact came from Nvidia, Microsoft, Palantir, Broadcom and Advanced Micro Devices.

AI stocks have moved unevenly since the start of November, and that continued in Thursday’s session. Qualcomm shed 4% after the chipmaker posted better-than-expected quarterly results but said it may lose future business with Apple. Advanced Micro Devices, a standout on Wednesday, lost 7%, while Palantir Technologies and Oracle declined 5% and 3%, respectively. Shares of AI darling Nvidia and fellow “Magnificent Seven” name Meta Platforms sank as well.

“So much of this stuff from a valuation standpoint was so lofty and priced for perfection that we’re seeing in the market a bit of a dichotomy between companies that are are beating and raising versus those that maybe are beating on the top line but providing tepid guidance on the bottom line or from an operating profit standpoint,” said Mike Mussio, president at FBB Capital Partners. “That’s the difference between some of these companies on earnings being up double digits versus being down double digits, and there’s not a lot of in-between.”

Thursday’s pullback was made worse by concerns about the state of the labor market, as October saw a significant number of layoff announcements. Job cuts in the month totaled more than 153,000, almost triple September’s rate and 175% higher than the same period a year, according to Challenger, Gray & Christmas. That’s the highest level recorded for the month of October in 22 years, in a year that’s shaping up as the worst for layoffs since 2009.

That data paints a shaky picture of the U.S. economy, particularly in light of the lack of data releases with the ongoing U.S. government shutdown. The stoppage, now in its 37th day, has become the longest in the country’s history.

“We’re starting to get dribs and drabs of the economic data … that’s not government related, and it’s not super rosy,” Mussio said, adding that “all that stuff is just setting up for some for some market weakness.” Though that doesn’t necessarily mean “this is the start of a major skid or anything,” he believes that if the government reopens and the data thereafter shows the consumer is “really not dead” as the holiday season unfolds, that “typical” year-end rally could “continue.”

Equities linked to the building out artificial intelligence capacity rebounded on Wednesday after suffering from valuation concerns earlier this week, lifting major indexes. AMD closed more than 2% higher Wednesday after the semiconductor company posted better-than-expected third-quarter results. That boosted some other AI stocks, including Broadcom and Micron Technology. Oracle also recouped some recent losses.

While the recovery of the AI names briefly aided a market recovery, all three major U.S. indexes are still firmly in the red week to date. Much of those week-to-date losses came Tuesday, when Palantir slumped 8% despite strong quarterly results, helping to drive down Nasdaq by 2% that day. Tuesday’s drawdown contrasted with Nasdaq’s advance Monday, spurred by a rise in Amazon and other AI names.

Investors were also looking at Washington, as the Supreme Court heard arguments over the legality of the Trump administration’s tariffs. They increasingly expect the Supreme Court to rule against the Trump administration’s aggressive trade policy after high court justices on Wednesday expressed some skepticism about the trade taxes’ legality. The potential ruling would trigger a rollback of the president’s tariffs, likely pushing stocks higher.