The Nasdaq 100 has one of its worst one-day drops since April, the Dow failed to hold a record high

The Nasdaq 100 Index, heavily weighted toward technology companies, fell 1.4% on Aug. 19, one of its worst performances since the April selloff. The S&P 500 lost 0.6%, and the Dow Jones once again failed to hold a record before the close. Indexes declined as technology companies related to artificial intelligence, including Nvidia and Palantir, fell. Investors worried about the prospects of an AI-related rally and locked in profits. In particular, they have been spooked by a study showing that 95% of companies get nothing from their investments in generative AI.

- The Nasdaq 100 index fell 1.39% and ended trading at 23,384.77 points. As Bloomberg writes, this is the second strongest drop in the index for the day since April, when markets collapsed due to Donald Trump's duties. The broader Nasdaq Composite lost 1.46%.

- The main U.S. index, the S&P 500, fell 0.6 percent to 6,411.37 points.

- The Dow Jones Industrial Average index of blue chips was the only one of the four major U.S. benchmarks that managed to grow - by an insignificant 0.02%. The Dow Jones set a new record at the beginning of trading, reaching 45,207.39 points. But it was unable to update the record at the close: it still remains the result of December 4, 2024 (45,014.04 points).

- The Russell 2000 index of small-capitalization companies fell 0.78% to 2,276.6 points.

- The securities of a number of technology companies, especially those related to artificial intelligence, have fallen sharply in value. Thus, the securities of Nvidia, the main supplier of AI chips, lost 3.5% of their value. Shares of Palantir, a developer of AI for military needs, fell by 9.35%, becoming the worst in the S&P 500 for the day. AMD and Broadcom shares fell 5.4% and 3.6%, respectively.

- On the other hand, good quarterly results of Home Depot raised its securities by 3.14% (which supported the Dow Jones index), as well as shares of other major retailers, Bloomberg writes. And Intel securities (+7%) were supported by investments of Japanese conglomerate Softbank and news that the White House may become the largest shareholder of the company.

The summer calm on Wall Street was disrupted by a sell-off in the securities of technology giants, which reflected how much the U.S. market now depends on a small number of major securities, Bloomberg writes.

"The AI boom may not be over yet, but it may have taken a breather. After the Nasdaq's rise of more than 40% since April, from a historical perspective, a pause is fine as long as the market is readjusting to the latest economic data and expected Fed policy," Lincoln Financial investment director Jason Bronchetti told CNBC.

According to the Financial Times, the market was affected on Tuesday by concerns about the market's over-enthusiasm around artificial intelligence. On Monday, August 18, the Massachusetts Institute of Technology project released a study that found that "95% of companies are getting zero return" on their investments in generative AI. "This story scares people," a trader close to a multi-billion dollar US technology fund told the FT. The name of the interlocutor and the name of the fund were not disclosed by the newspaper.

That investors have inflated a bubble around the topic of artificial intelligence was previously stated by Sam Altman - the head of OpenAI, which created the ChatGPT chatbot. "Are we now at a stage where investors in general are overly enthusiastic about AI? In my opinion, yes. Is AI the most important development in a very long time? In my opinion, also yes," Altman noted.

The sharp fall in shares of Nvidia, Palantir and the like was no surprise to Interactive Brokers senior market strategist Steve Sosnick. "A lot of them [the stocks that fell] were highly sought after, so when the move to the exits starts, things can get confusing," he said in an FT statement.

Traders are also preparing for the speech of the head of the U.S. Federal Reserve Jerome Powell, which is expected on Friday, August 22, Bloomberg writes. The market expects the Fed to reduce the interest rate in September by a quarter of a percentage point, and also expects at least one more reduction before the end of the year. Bank of America strategists Mark Cabana and Megan Suibert believe that Powell's speech is unlikely to be as "dovish" as the market expects, the agency reports.

This article was AI-translated and verified by a human editor