Another day of market losses and tech selloffs, and with Nvidia added to the mix, we have the market report ready.
- The S&P 500 had another bearish day, down 0.8% on Tuesday, with declines in retail and technology stocks like Western Digital, AMD, and Home Depot.
- The tech-heavy Nasdaq was down 1.2%, while the Dow, with a decline of nearly 500 points, closed 1.1% lower.
- The small-cap Russell 2000 was the only one to show gains, finally up 0.3% on Tuesday after several days of losses.
The debate over the ‘soon-to-pop’ AI bubble is impacting the market, turning the previously bullish into bearish.
The CBOE Volatility Index (VIX), also known as the “fear index,” which tracks market volatility, rose 10% to 24, signaling increasing investor anxiety.
Major business news at a glance:
Cloudflare suffers major Internet outage
You may have found that your internet connection stopped working in the morning, like mine did, which led to people making reels in their office.
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Here is the reason: a Cloudflare outage occurred in the early hours of Tuesday, which led to disruption as ChatGPT and other services, including X, Canva, and others, stopped working.
While the outage disrupted workflow for some time, similar to the AWS outage last month, it led more people to ask what exactly Cloudflare is.
For the uninitiated, Cloudflare is like a security wall that protects your connection while also helping websites load faster. Think of all the CAPTCHA you have to complete to prove you are a human, and how many sites simply skip that step. Cloudflare manages that verification behind the scenes.
“Cloudflare helps connect and protect millions of customers globally. Everyone from individuals to the world’s largest enterprises use our unified platform of networking, security, and developer services to succeed everywhere in the world,” notes the company page.
Congress votes on Epstein files
In Washington, the House unanimously passed a measure to release all the Jeffrey Epstein files, and it will now head to the Senate.
Tech stocks swing; Nvidia inks deal
Ahead of Nvidia’s earnings report on Wednesday, Anthropic released a new circular deal with Nvidia and Microsoft, where Anthropic has committed to “purchase $30 billion of Azure compute capacity and to contract additional compute capacity up to 1 gigawatt.” In return, Nvidia and Microsoft will partner to support Anthropic’s future growth.
Nvidia’s and Microsoft’s stock fell 2.8% and 2.7% at the close, respectively, and were also trading lower after hours.
While tech stocks such as AMD, Micron, and Amazon declined on Tuesday, health stocks like Medtronic and Merck took the lead, rising 4.7% and 3.8%, respectively.
Gold declined slightly, down 0.2% and Oil remained above the $60 per barrel price, up 1.2%.
In new releases, Google announced Gemini 3 today, a week after OpenAI launched ChatGPT 5.1. Alphabet stock was down 0.3% today.
EV maker Rivian’s spinoff company ALSO, which produces electric bikes, has announced a more affordable e-bike, the TM-B, priced at $3,500. The company stock was up 0.8%.
What’s behind the market sell-off?
This is a complicated question to answer, but a notable connection is the overreliance on tech stocks and AI expenditure, which has been driving the market upward in the past quarter, following the aftermath of the tariff.
“AI stocks have pushed some US stock valuation metrics to their highest level since the dot com bubble 25 years ago, though these metrics do not fully account for the high projected earnings growth of many AI-impacted companies.” Bank of England
While some of these valuations seem justified if their earnings growth materializes, the Bank of England notes that the path is uncertain.
Related: JPMorgan delivers shock verdict on the stock market
The increasing expenditures on AI Infrastructure to attract future revenue are making investors increasingly skeptical. Similar to companies citing AI risks in their financial statements, investors are also identifying risks, as they are unable to see any immediate return on investment.
With new earnings coming in and the announcement of newer AI deals, investment firms are pulling money out of some major companies. Peter Thiel’s Thiel Micro LLC and SoftBank recently dumped their NVIDIA shares.
A McKinsey report estimates that there is an increasing gap of $5.2 trillion to fund the data centers “equipped to handle AI processing loads” by 2030.
Morgan Stanley estimates that the AI Infrastructure CAPEX “between 2025 and 2028 will be $2.9 trillion, with $1.5 trillion expected to be met by external capital, including $800 billion from private credit.”
With the future highly uncertain, rising expenditures have exposed banks to risks associated with “debt-financed and associated energy infrastructure.”
This, combined with fading certainty over future rate cuts by the Federal Reserve, a weakening labor market, and the lack of recent data (due to the government shutdown), is resulting in a market decline.
Now, this may all change quickly, as is normal with the stock market, because near-term decisions might not accurately reflect long-term beliefs in AI investment fundamentals.
Related: Walmart stock investors brace for earnings
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