US Stocks Fall on CEO Warnings of Market Correction Amid AI Stock Concerns
US stocks declined on Tuesday as the CEOs of Goldman Sachs and Morgan Stanley issued warnings that markets are due for a correction, intensifying investor fears that AI stocks have become overvalued. The Dow Jones Industrial Average plunged 450 points, or 1%, while the S&P 500 and Nasdaq slid 1.2% and 1.7%, respectively.
Goldman Sachs CEO David Solomon spoke at a financial summit in Hong Kong, stating, “It’s likely there’ll be a 10 to 20% drawdown in equity markets sometime in the next 12 to 24 months. Things run, and then they pull back so people can reassess.” Solomon, who previously compared AI stocks to the dot-com bubble of the 1990s, reassured investors that such a reversal is typical for long-term bull markets.
He added that the bank is still advising clients to stay invested for the long haul. “A 10 to 15% drawdown happens often, even through positive market cycles. It’s not something that changes your fundamental, your structural belief as to how you want to allocate capital,” Solomon said.
Morgan Stanley CEO Ted Pick echoed similar sentiments, suggesting that investors should welcome periodic pullbacks as a sign of a healthy stock market. “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,” he said during the same conference.
Despite an upbeat earnings report, shares of Palantir plunged 9.7% on Tuesday amid debates among analysts over whether the company’s valuation has been overblown. The software giant delivered an enthusiastic forecast, expecting to hit $1.33 billion in revenue for the current period. However, multiple analysts cautioned that even this achievement might not justify its soaring valuation. Palantir’s shares have surged about 175% so far this year.
Other AI-related stocks also experienced declines, with Oracle falling 2.4%, AMD down 3.6%, Nvidia slipping 2.5%, and Amazon dropping 1%.
This downturn follows a mixed market performance on Monday, when the S&P 500 and Nasdaq ended higher but the Dow plummeted more than 200 points.
Investor concerns are further compounded by worries about potential economic fallout from the ongoing government shutdown, which tied the record for the longest in history at 35 days on Tuesday.
Federal Reserve Chair Jerome Powell, along with Bank of England Governor Andrew Bailey and the International Monetary Fund, have also warned that stock valuations might be inflated.
Despite these challenges, both Goldman Sachs and Morgan Stanley remain bullish on Asia, citing a recent trade deal between the US and China as a positive factor. Goldman Sachs highlighted China as one of the “largest and most important economies” in the world.
Morgan Stanley’s Ted Pick expressed optimism about the region, saying, “It’s hard not to be excited about Hong Kong, China, Japan, and India — three vastly different narratives, but all part of a global Asia story.” He also noted China’s AI, electric vehicle, and biotech sectors as industries with significant growth potential.
https://nypost.com/2025/11/04/business/dow-falls-450-points-as-goldman-sachs-morgan-stanley-warn-of-market-correction/
