Global equities faced significant declines on Tuesday as investors grappled with inflated valuations and an uncertain macroeconomic landscape, all while anticipating Nvidia’s earnings report later this week. The pan-European Stoxx 600 opened lower, with mining and banking sectors leading the downward trend. The Stoxx Europe 600 Technology Index dropped by 1.4%, reflecting similar losses in U.S. stocks, amid ongoing fears of a potential AI bubble.
All three major U.S. indexes-the Dow Jones Industrial Average, S&P 500, and tech-heavy Nasdaq Composite-closed the previous trading session in the red. Asian markets followed suit, with Japan and South Korea experiencing notable declines.
Mike Gallagher, director of research at Continuum Economics, indicated that the market’s current trajectory suggests a possible contraction of around 5% from recent highs, potentially even more. In an interview with CNBC’s “Squawk Box Europe,” he characterized the sell-off as “natural profit taking” after a strong market rally since April.
This downturn unfolds against a backdrop of AI bubble concerns, coinciding with the market’s keen focus on Nvidia’s third-quarter earnings, due after Wednesday’s market close. Nvidia is viewed as a critical bellwether for the AI sector, with many major companies relying on its GPUs.
Recent earnings reports have shown that major hyperscalers are projected to continue generating substantial revenue through 2026-27, Gallagher noted. Investors are particularly scrutinizing Meta, which serves as a vital indicator of the AI sector’s revenue potential, especially as it lacks a robust server business. “This suggests we are witnessing a routine, healthy correction,” Gallagher added.
Yuri Khodjamirian, Chief Investment Officer of Tema ETF, attributed the sell-off to a “healthy dose of skepticism” as the market comes to terms with the financing of significant deals announced over the summer. He highlighted OpenAI’s ambitious spending commitments on GPUs and data centers, stating that investors are beginning to recognize that the growth they anticipated might unfold more gradually than expected.
“There is a balancing act occurring in the market,” Khodjamirian explained. He pointed out that Oracle’s stock price has returned to pre-OpenAI announcement levels, indicating a stabilizing trend. He believes the ongoing dynamics of data center expansions, as evidenced by companies like Microsoft, Meta, and Nvidia, will continue on an upward trajectory, reinforcing the notion of a healthy market correction.
However, Gallagher cautioned about the current environment of de-risking, fueled by uncertainty regarding a previously anticipated Federal Reserve rate cut in December. He mentioned that the central bank will likely pause interest rate adjustments in the first quarter of 2026. “Suddenly, the drivers that have supported risk are no longer present,” he noted, pointing to potential implications from upcoming Supreme Court rulings on Trump’s tariffs.
“Some looming developments may inspire caution among investors, leading to a reduction in risk exposure. The probability of a major sell-off hinges on receiving significant negative news, which we haven’t encountered yet,” Gallagher affirmed. He also observed exaggerated fluctuations in the cryptocurrency market, with Bitcoin down roughly 25% and Ether declining 35% from their recent highs.
Khodjamirian adopted a longer-term perspective, emphasizing concerns about electricity access for data centers as a significant challenge. “Executives worldwide are realizing that providing power is critical for the expansion of data centers, which could slow progress in the AI sector and other initiatives like electric vehicles and digital currencies,” he said.
As stock markets navigate these complexities, the upcoming Nvidia earnings will play a pivotal role in shaping investor sentiment and expectations in the tech sector.
Original Source: https://www.cnbc.com/2025/11/18/global-stocks-slide-as-valuation-fears-grow-ahead-of-nvidia-earnings.html
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Publish Date: 2025-11-18 15:09:00
