Markets slide as AI shares retreat

Wall Street slips as AI heavyweights retreat while investors await policy signals and earnings.

AI stocks pull markets lower as Nvidia and Palantir stumble

New York traders watched Nvidia fall 1.4 percent and Palantir drop 2.2 percent as the S&P 500 slid 0.5 percent and the Nasdaq fell about 1 percent by mid afternoon. The Dow Industrials were down 0.1 percent as trading remained choppy and intraday moves were wide. Nvidia has been a major index weight this year, with losses at one point deeper than 3 percent before trimming some of the drop. Palantir, after a sharp earlier run, faced renewed selling that broadened losses across the AI complex.

Investors weighed mixed signals from the market for AI related stocks. A study from MIT’s Nanda Initiative suggested most firms have not yet seen measurable returns from generative AI, adding to questions about how quickly AI investments translate into profits. At the same time, traders are watching the broader policy backdrop, including a highly anticipated Jackson Hole speech by Federal Reserve Chair Jerome Powell, and shifts in expectations for rate cuts. On the earnings front, retailers posted a mixed picture with TJX and Lowe’s topping forecasts while others faced pressure; Target disclosed leadership changes, and Estee Lauder and La-Z-Boy reported results that missed expectations.

The current pullback highlights a long simmering tension in the AI rally. Markets punished valuations that had surged well beyond traditional earnings metrics, even as some investors still insist AI will redefine productivity and growth. The challenge for the market is to separate genuine long term gains from a rapid, headline driven spike that may not be sustainable without clear and durable returns. Powell’s tone in Jackson Hole could sharpen that debate, turning policy expectations into a decisive market driver rather than a backdrop. The global mix of weaker earnings in some sectors and resilient consumer demand in others suggests a broader rotation beneath the surface, even as tech leadership remains volatile.

In the near term, the question for investors is whether AI’s promise will translate into steady profits or fade under the weight of high expectations and rising policy risk. The market seems to be calibrating not just to quarterly results but to the more uncertain path of AI driven productivity, tariffs, and central bank policy. If the next batch of earnings confirms real ROI, the AI rally could regain momentum; if not, the pullback could extend to other high flyers and more cautiously priced growth stocks.

Highlights

Markets will test whether AI hype can turn into durable earnings power.