S&P500: Analysts Flag AI Valuation Risks After Key US Stocks Miss Earnings Targets

AI Valuations Face Renewed Scrutiny as Earnings Disappoint

U.S. equity markets traded mixed Wednesday as investor concerns over artificial intelligence valuations intensified following a wave of disappointing tech earnings.

At 14:44 GMT, the Dow Jones Industrial Average traded at 47,141.71, up 56.47 or 0.12%. The S&P 500 Index stood at 6,766.51, down 5.04 or 0.07%, while the Nasdaq Composite Index declined to 23,311.838, down 36.799 or 0.16%.

Advanced Micro Devices fell 2% in premarket trading after issuing margin guidance that merely met analyst expectations, despite posting third-quarter earnings and revenue that exceeded forecasts. The chipmaker trades at 41 times forward earnings, nearly double the S&P 500’s multiple of 23 times.

Palantir dropped approximately 8% Tuesday as its valuation exceeding 200 times forward earnings sparked concern that AI-related stocks have become unsustainable.

Multiple AI Plays Report Weak Results

Super Micro Computer retreated 7% in premarket trading on disappointing fiscal first-quarter results, posting adjusted earnings of 35 cents per share on revenue of $5.02 billion against analyst expectations of 40 cents per share on $6 billion in revenue.

Arista Networks declined 6% despite delivering a third-quarter beat, as fourth-quarter revenue guidance of $2.3 billion to $2.4 billion failed to impress investors.

SoFi’s Liz Young Thomas noted that while valuation concerns are valid, investor momentum in large-cap names remains intact. “The chase is still on,” she told CNBC. “But today, we were looking for an excuse.”

Labor Market Shows Resilience

Private payrolls increased by 42,000 in October, according to ADP, beating the Dow Jones forecast of 22,000 and reversing September’s revised decline of 29,000. Trade, transportation and utilities added 47,000 positions, while education and health services contributed 26,000 jobs. The better-than-expected data suggests the labor market remains stable, potentially supporting the Federal Reserve’s cautious approach to future rate adjustments.

Notable Movers Span Multiple Sectors

Pinterest plunged more than 17% after posting third-quarter earnings of 38 cents per share, missing the 42 cents analysts expected. McDonald’s slipped 1% on adjusted earnings of $3.22 per share and revenue of $7.08 billion, both falling short of consensus estimates of $3.33 and $7.1 billion respectively.

Teradata surged 14% after delivering third-quarter adjusted earnings of 72 cents per share on revenue of $416 million, beating forecasts of 54 cents and $406.3 million. Lumentum soared 17% on fiscal first-quarter results that exceeded expectations, while Kennedy-Wilson rallied 24% following a takeover offer at $10.25 per share, representing a 37.2% premium.

Market Outlook: Bearish Near-Term

Technology sector weakness signals growing investor skepticism toward elevated AI valuations, particularly as earnings fail to justify premium multiples. With Qualcomm, Arm Holdings, and Robinhood reporting after the bell, further disappointments could deepen selling pressure across semiconductor and financial technology names, increasing near-term downside risk.

More Information in our Economic Calendar.