US stocks declined on Tuesday, led by losses in artificial intelligence-linked names such as Palantir, as investors reassessed stretched valuations following a year-long rally in technology shares.
The S&P 500 fell 1.2% shortly after the market opened, while the Nasdaq Composite declined 1.7%. The Dow Jones Industrial Average dropped 430 points, or 0.9%.
The declines come after a mixed session on Monday, when the S&P 500 and Nasdaq Composite closed higher, while the Dow lost more than 200 points.
The S&P 500 remains within 1% of its record high after closing above 6,800 for the first time last month.
Despite the headline strength, more than 300 stocks in the benchmark index ended Monday in the red, underscoring concerns about weak breadth and heavy concentration in a handful of large-cap technology stocks.
Investors are also contending with the prolonged US government shutdown, now in its 35th day, tying the record for the longest in history, and uncertainty over whether the Federal Reserve will deliver a third consecutive rate cut at its December meeting.
Fed Governor Lisa Cook said Monday that the central bank’s December decision would hinge on incoming economic data and whether the inflationary impact of tariffs was easing.
Palantir leads declines despite strong results
Palantir Technologies plunged 8% in early trading, despite reporting stronger-than-expected third-quarter earnings and robust guidance driven by its artificial intelligence business.
The company forecast $1.33 billion in revenue for the current period, ahead of analyst expectations of $1.19 billion, according to LSEG. Revenue in the prior quarter rose 63%.
Deutsche Bank strategist Jim Reid said in a note that “their results were good but markets were disappointed at the lack of company visibility for the whole of 2026,” adding that valuation concerns also remain.
Palantir’s shares, which had surged 173% year-to-date through Monday, trade at over 200 times forward earnings, with its price-to-earnings ratio approaching 700 heading into Tuesday.
Investors have increasingly questioned whether such lofty valuations can be sustained without further upward revisions in profit and revenue forecasts.
Broader tech weakness
Other major AI and technology stocks also lost ground. Oracle fell 3%, paring its 55% gain this year.
The stock currently trades at a P/E of 60 and a forward P/E of 35.
Advanced Micro Devices (AMD), which has more than doubled in 2025 and carries a P/E of 149, slipped over 2%.
Nvidia and Amazon both dropped around 2% before the opening bell.
The rally in artificial intelligence and technology names has pushed the S&P 500’s forward price-to-earnings ratio above 23, near its highest level since 2000, according to FactSet.
Analysts have increasingly warned that elevated valuations leave the market vulnerable to corrections.
Caution from Wall Street executives
Investor sentiment was further dampened by warnings from leading Wall Street executives about the potential for market pullbacks.
Goldman Sachs CEO David Solomon said overnight that it was “likely there’ll be a 10 to 20% drawdown in equity markets sometime in the next 12 to 24 months.”
Morgan Stanley CEO Ted Pick echoed similar caution, noting, “We should also welcome the possibility that there would be drawdowns, 10 to 15% drawdowns that are not driven by some sort of macro cliff effect.”
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