Nasdaq Falls as Valuation and Growth Worries Mount

The Nasdaq closed sharply lower on Tuesday, dragged down by another wave of selling in high-priced technology and AI-linked stocks, as investors grew more uneasy about whether earnings and the broader economy can justify the market’s richest valuations. After several sessions in which the index had been propped up by a narrow group of mega-caps, the support finally gave way: once those leaders turned lower, the weakness spread to the rest of the growth complex, leaving the Nasdaq as the day’s biggest loser among the major U.S. averages.

What made the move stand out was that it wasn’t triggered by a single shock, but by a stack of medium-sized concerns arriving at once. On the one hand, investors are still digesting signs of a cooling U.S. labor market, with softer job creation and rising layoff headlines hinting that growth may be losing steam. On the other hand, several of the market’s most celebrated AI beneficiaries have begun to guide more cautiously on spending and demand, reminding traders that even transformational themes go through investment cycles. Put together, it was enough to push buyers to the sidelines and let prices reset lower.

The selling was most visible in the names that had run the furthest. Big chipmakers, data-center suppliers and software platforms tied—directly or indirectly—to AI saw some of the heaviest profit-taking as traders questioned whether the near-vertical rerating of 2025 can continue without a fresh batch of upside surprises. These are still high-quality businesses with strong balance sheets, but they are also the ones where expectations are highest. When growth looks a little less explosive and the macro backdrop turns a little less friendly, they are the first to be marked down.

Broader market tone didn’t help. The S&P 500 also slipped, and the Dow gave back ground, underscoring that this wasn’t purely a tech-only event. A firmer dollar and lingering uncertainty over the next moves from the Federal Reserve added to the cautious mood. While inflation has eased enough for the Fed to pause, officials have made clear they want to see more convincing evidence that price pressures are fully contained. For equities, that means rates are likely to stay restrictive for longer than growth-stock investors would prefer, keeping valuation multiples under pressure.

Still, the pullback looked more like a position clean-up than the start of a disorderly selloff. Credit markets remained calm, Treasury yields didn’t spike in a way that would signal stress, and there was no sign of forced liquidation across assets. What the session showed, instead, is that the market has reached a point where AI, semiconductors and mega-cap tech need new catalysts—stronger guidance, clearer monetization, better macro data—to climb again from already elevated levels. Without those catalysts, rallies will be harder to sustain and sharp down days like today will be more frequent.

For now, traders will watch the next round of economic releases and company updates to see whether Tuesday’s drop becomes a trend or stays a one-day reset. If growth data stabilizes and tech earnings hold up, dip-buyers who have been waiting for better entry points could re-emerge. If not, the market may have to spend more time repricing its most crowded winners.

Sources: Yahoo Finance; related U.S. market coverage from Reuters and Associated Press on the tech-led selloff; recent Nasdaq and S&P 500 closing data.