Futures for the S&P 500 and Nasdaq-100 experienced a decline on Wednesday, amid ongoing valuation concerns regarding the artificial intelligence sector, following the recent quarterly results released by chipmaker Advanced Micro Devices. Futures associated with the S&P 500 experienced a decline of 0.4%, whereas those connected to the Nasdaq-100 fell by 0.6%. Futures for the Dow Jones Industrial Average hovered near the neutral point. AMD experienced a decline of over 4% following the release of margin guidance that merely aligned with analyst expectations, resulting in a sense of dissatisfaction among investors. The company reported third-quarter earnings and revenue that exceeded analyst expectations.
The recent decline follows a roughly 8% decrease in Palantir’s stock on Tuesday, as investor concerns mount regarding the sustainability of valuations for the software firm and the wider artificial intelligence sector. After all, Palantir is valued at over 200 times its projected earnings. AMD is valued at a more modest 41 times forward earnings. However, that’s still well above the 23 multiple of the S&P 500. Many investors continue to express optimism regarding the long-term trajectory of tech stocks, despite the potential for a short-term pullback, largely due to the robust investment in AI infrastructure.
“I don’t think that this is concerning today,” stated Liz Young Thomas, during her appearance on Tuesday. “I believe that the extent of our progress thus far is indeed concerning in the long run, yet I maintain that we are likely to encounter challenges as we approach the end of the year. I maintain that the pursuit continues.” The ongoing preference for large-cap stocks remains evident. And that is likely to remain unchanged over the longer term,” she continued. “However, I believe we were seeking a justification today.”
On the economic front, investors will persist in their quest for clarity by utilizing alternative data instead of relying on government reports. On Wednesday, the ADP private payrolls report is scheduled for release. Upcoming releases include weekly mortgage applications and ISM services data.