Shares tumble as valuation concerns hit markets

General market commentary

Equities fell sharply on Tuesday, with the technology-heavy Nasdaq leading the downturn amid growing concerns about high valuations in the tech sector. The Nasdaq slid 2%, its largest single-day decline since 10th October, while the S&P 500 lost 1.2%. Among the hardest-hit shares were those of Palantir Technologies and Nvidia, which dropped nearly 8% and 4%, respectively, after investor Michael Burry took bearish positions on the two companies. This correction comes amid a strong earnings season, where 83% of S&P 500 companies reported better-than-expected results. However, despite robust corporate earnings, high expectations for technology companies appear to be contributing to increased volatility, with even solid results failing to fully offset concerns over stretched valuations.

Shares in major technology firms such as Amazon, Alphabet, Meta Platforms, and Microsoft all closed lower, as investor sentiment soured on overvalued equities. Tesla saw a 5.2% drop after a proposal to approve a $1 trillion compensation package for CEO Elon Musk was met with shareholder opposition. Uber Technologies also experienced a significant 5.1% decline, despite beating earnings expectations, as concerns over a slowdown in bookings weighed on its outlook. In contrast, Yum Brands rose 7.3% after announcing it was exploring strategic options for its struggling Pizza Hut brand. Broader market movements saw US Treasury yields edge lower and oil prices decline, as the US government shutdown entered its 35th day, contributing to a more cautious investor outlook.

Latest market and economic update

Asian equity markets fell sharply on Wednesday, with Japan’s Nikkei and South Korea’s KOSPI dropping over 4%, hit by tech valuation concerns. The sell-off was driven by fears of a potential market correction. China’s Shanghai Composite and Hong Kong’s Hang Seng also declined, while Australia’s S&P/ASX 200 and Singapore’s Straits Times Index also saw losses.

U.S. equity futures dipped on Tuesday after broad losses on Wall Street, driven by concerns over valuations and Fed policy uncertainty. In after-hours trading, Advanced Micro Devices (AMD) dropped over 4% despite beating earnings estimates, Pinterest tumbled 20% on weak revenue guidance, and Super Micro Computer fell over 9% on bleak forecasts.

European shares slipped yesterday as investors took profits amid economic uncertainty and earnings reports. Germany’s DAX fell 0.8%, France’s CAC 40 0.5%, while the UK’s FTSE 100 rose 0.1%. Eurozone manufacturing stagnated, and ECB rate cuts seem unlikely. BP, Philips and Domino’s posted mixed results.

The US dollar index remained above 100 on Wednesday, reaching its highest level since May, driven by risk-off sentiment and growing concerns over AI valuations. Speculation that the Federal Reserve may hold rates steady in December supported the dollar, with the EUR/USD exchange rate at 1.1490. Ongoing US government shutdown added to market uncertainty.

Oil prices dipped this morning, pressured by a broader market slump, a stronger U.S. dollar, and rising U.S. crude stockpiles. Brent crude fell to $64.38 a barrel, while West Texas Intermediate dropped to $60.46. OPEC+'s decision to increase output in December and supply concerns also weighed on prices amid a risk-off market sentiment.

Democrats triumphed in key local and state elections on Tuesday, with Zohran Mamdani winning New York City’s mayoral race, and Abigail Spanberger and Mikie Sherrill securing governorships in Virginia and New Jersey. These victories, driven by strong economic messages, gave the party momentum ahead of the 2026 elections, despite ongoing challenges.

Equities on the move

The following companies experienced moves in their share price driven by analyst ratings, quarterly earnings, or other news:

Advanced Micro Devices (AMD) forecasted fourth-quarter revenue of around $9.6 billion, exceeding market expectations, driven by strong demand for its AI chips. The company reported a 22% revenue increase in its key data centre segment. However, concerns over an AI bubble and chip shares valuations weighed on equities, which fell 4.7% in after-hours trading.

Pinterest's shares dropped over 20% in after-hours trading after it forecast Q4 revenue slightly below Wall Street expectations. The company projected revenue between $1.31 billion and $1.34 billion, citing lower ad spending in the U.S. and Canada. While global monthly active users rose to 600 million, monetising these users remains a challenge.

Super Micro Computer’s shares dropped over 9% after missing Q1 profit and revenue estimates, with $1.5 billion in expected revenue delayed to Q2 due to complex GPU integration. Despite this, it raised its Q2 revenue forecast to $10-11 billion and lifted its full-year revenue outlook to $36 billion, driven by strong AI demand.

Live Nation reported a rise in third-quarter revenue to $8.5 billion, driven by strong demand for concerts and festivals. The company saw increased ticket sales, with 26 million tickets sold for 2026 events. Despite missing analysts' expectations for concert business revenue, ticket sales outperformed estimates, reaching $797.6 million. Shares fell by over 5% in afterhours trading.

Estée Lauder’s shares fell 2% in afterhours after it announced that trusts linked to Leonard A. Lauder’s descendants plan to sell over 11.3 million shares to settle his estate. The Lauder family will retain significant control, holding around 82% of the voting power. The secondary offering raised concerns about increased share supply impacting investor sentiment.

Morgan Stanley CEO Ted Pick warned that global equity markets could face a correction of 10–15%, even without a major macroeconomic shock. Speaking at the Global Financial Leaders’ Investment Summit in Hong Kong, he urged market participants to prepare for potential downward movements, emphasising that such drawdowns can occur as part of normal market fluctuations.

Apple plans to launch a budget Mac laptop in the first half of next year, priced below $1,000 and aimed at students, businesses, and casual users. The device, code-named J700, will feature an iPhone processor, a smaller LCD screen under 13.6 inches, and simpler components, targeting Chromebook and entry-level Windows PC buyers.

Ferrari posted a 5% rise in third-quarter core earnings, aided by pricier SF90 XX and 12Cilindri models and personalised options, despite U.S. import tariffs. Shipments rose 0.5%. Shares gained 3.1% in Milan. EBITDA reached €670 million, above expectations, and the company reaffirmed its 2025 forecasts, while preparing for its first electric car launch.

Spotify forecast Q4 profit above expectations, driven by strong user growth and price hikes. Premium subscribers hit 281 million, with 713 million monthly active users. Revenue is projected at €4.5 billion, supported by expanded audiobooks, video podcasts, and high-quality streaming, amid competition from Apple and Amazon.

Shopify forecast strong holiday-season revenue growth, driven by consumer demand and adoption of its AI tools, particularly Sidekick, which aids small- and medium-sized businesses. Third-quarter gross margins fell to 48.9% due to higher R&D, marketing, AI, and international expansion costs. Revenue is expected to rise in the mid-to-high twenties percent in Q4.

Shares of Nintendo surged by up to 10.1% this morning after the company reported a sharp rise in earnings, driven by strong demand for the Switch 2 console. For the six months to September 30, revenue more than doubled, and net profit rose 85%. Nintendo raised its full-year sales forecast to 19 million units and increased its profit target by 16%.

BP posted a smaller-than-expected third-quarter profit of $2.21 billion, boosted by strong refining and divisional performance. The Castrol sale remains under review as the company focuses on oil and gas profitability. High refining margins, output, and asset sales helped results, outperforming rivals despite lower crude prices.

Palantir Technologies fell over 8% despite strong quarterly results and a fourth-quarter revenue forecast above expectations, driven by AI demand and U.S. government contracts. Investor Michael Burry has taken bearish positions. Shares have surged 170% this year, trading at around 250 times forward earnings, well above peers like Nvidia and Microsoft.

OpenAI signed a seven-year, $38 billion deal with Amazon Web Services for Nvidia GPUs to power AI models, following a restructuring increasing its operational freedom. The deal highlights AI’s massive computing needs. OpenAI also maintains agreements with Microsoft, Google, and Oracle, amid rising losses and plans for a potential IPO.

Pfizer and Novo Nordisk are locked in a legal battle over obesity drug developer Metsera, with Novo’s $10 billion bid deemed superior to Pfizer’s $8.1 billion offer. The Delaware court is reluctant to intervene, allowing the auction process to continue. Meanwhile, Pfizer raised its 2025 profit forecast despite falling COVID-19 product sales and patent pressures.

Eli Lilly and Novo Nordisk are reportedly set to strike deals with the White House to offer the lowest dose of their weight-loss drugs at $149 per month in exchange for Medicare coverage. The agreement, expected this week, follows similar price-cut deals by Pfizer and AstraZeneca as President Trump pushes to lower U.S. drug costs.

Rheinmetall is finalising a multi-billion-euro ammunition supply contract and in talks with Germany on a satellite system, CEO Armin Papperger said. Domestic orders are strong, with a drone factory in the Baltics and a joint venture with Italy’s Leonardo for combat vehicles underway. Contracts worth around €5 billion are expected over the next year.

Starbucks will sell a controlling 60% stake in its China operations to Boyu Capital for $4 billion, aiming to expand from 8,000 to over 20,000 stores. Starbucks retains 40% and licensing rights, with the total China business valued at over $13 billion. The move seeks growth amid rising competition from Luckin and Cotti.

IBM plans to cut thousands of jobs in the fourth quarter as it shifts focus to higher-growth software and services, Bloomberg reported. The reductions will affect a low single-digit percentage of its 270,000-strong global workforce. Some U.S. staff may be impacted, though overall U.S. employment is expected to remain steady year on year.

Unilever said it expects to complete the spin-off of its Magnum Ice Cream unit by 6 December, delayed by the U.S. government shutdown, which prevented the SEC from approving the required registration. Magnum shares will now list on 8 December in Amsterdam, with secondary listings in New York and London. The shutdown may cost $15 billion weekly.

Chewy Inc. raised the annual fee for its Chewy+ membership to $79, up from $49, according to Mizuho. The significant price increase could help offset expected gross margin weakness in FY2025, indicating strong customer loyalty and potential revenue growth. Mizuho maintained an Outperform rating on the company, citing incremental revenue opportunities for FY2026.

Jefferies raised Nvidia’s price target to $240 from $220, maintaining a Buy rating, citing strong AI compute demand and clearer order visibility. Hyperscale cloud providers are signing large AI deals, with Nvidia projecting $500 billion in 2025–2026 orders. Revenue forecasts for 2026 and 2027 were lifted to $293 billion and $384 billion, with 2027 EPS expected at $9–$10.

Jefferies named Broadcom its Top Pick, raising the price target to $480, citing surging AI chip demand from hyperscalers. Broadcom’s ASIC business is set for rapid growth, with AI-related revenue forecast at $10 billion in 2027, potentially reaching $40–50 billion in 2028. Revenue and EPS forecasts for 2026–2027 were also lifted, reflecting strong upside potential.

Barclays upgraded Moncler to “overweight” and adjusted Hermès to “equal weight” after strong Q3 results, keeping LVMH steady and Kering underweight. Recovery is supported by U.S. demand and improving China trends, but Q3 sales remained negative for most brands, and Barclays warned a clear EPS inflection is not guaranteed.

UBS upgraded Porsche SE to “neutral” from “sell,” raising the price target to €37, reflecting updated valuations for Volkswagen and Porsche AG holdings. Volkswagen’s 2026 operating profit is forecast at €17.2 billion, while Porsche AG offers limited upside. Porsche SE’s net debt improved, with dividend forecasts of €1.47–€2.66 per share through 2027.

Bank of America downgraded DraftKings and Flutter Entertainment to Neutral, citing volatile betting margins, rising taxes, and slowing growth in emerging prediction markets. DraftKings’ U.S. iGaming share fell to 23%, prompting a 2026 EBITDA cut to $1 billion. Flutter faces similar pressures, with its 2026 EBITDA forecast reduced to $3.66 billion.

BMO raised Cameco’s price target to C$160, keeping an Outperform rating, citing growth from its Westinghouse stake and a U.S. government nuclear partnership. The deal supports new AP1000 reactors and boosts earnings visibility. Cameco’s EBITDA is expected to grow 27% over two years, keeping it a key nuclear investment play.

Bernstein downgraded Ryanair to “market-perform” due to high valuations, despite strong operations. Shares have risen over 40% YTD. The airline remains Europe’s most profitable, with solid cash flow and dividends. Further upside depends on higher profit per passenger or expanded valuation multiples, while IAG offers greater potential returns.

Upcoming data and events

Key U.S. data due today include the ADP Nonfarm Employment Change, a precursor to Friday’s jobs report, the ISM Non-Manufacturing PMI, and the JOLTs Job Openings report, offering insights into labour and services sector conditions. The EIA Crude Oil Inventories data will gauge energy fundamentals, while earnings releases feature Qualcomm, McKesson, Allstate, MetLife, and AppLovin.

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