Wall Street Warns Tech Stocks Face Correction Amid AI Valuation Concerns

Tech stocks faced significant declines as Wall Street executives expressed concerns over high valuations and the sustainability of the AI-driven market rally, with warnings of a potential market correction exceeding 10% within the next two years. Palantir, despite beating earnings and raising revenue forecasts, saw its shares drop sharply due to investor caution, highlighting sensitivity to any signs of trouble amid a 150% surge in its stock this year and an extremely high price-to-sales ratio. The Nasdaq, S&P 500, and Dow futures all fell, with volatility rising to near two-week highs, as investors awaited earnings from major companies like AMD and Qualcomm amid broader economic uncertainties including a potential US government shutdown impacting Federal Reserve data. Fed officials provided mixed signals on interest rates, causing speculation about the timing and likelihood of rate cuts to shift, further unsettling markets. Global stock indices also weakened alongside the US markets, reflecting broader doubts about the tech sector's momentum and the impact of AI hype on valuations. Overall, investors are reassessing the rapid tech rally, concerned that much optimism is already priced in, and preparing for potentially choppier market conditions ahead.