Global stocks slide as valuation fears grow ahead of Nvidia earnings

Global equities tumbled Tuesday as concerns of inflated valuations and an uncertain macro environment grips investors ahead of Nvidia earnings this week.  

The pan-European Stoxx 600 opened in negative territory on Tuesday with mining-linked stocks and banks leading Europe’s losses. The Stoxx Europe 600 Technology Index shed 1.4%, following in the footsteps of U.S. stocks as fears of an artificial intelligence-fueled bubble persist.  

The three major U.S. indexes, Dow Jones Industrial Average, the S&P 500 and tech-heavy Nasdaq Composite, ended the previous trading session in the red. Asia-Pacific markets were also lower on Tuesday, led by declines in Japan and South Korean benchmark indexes.

Mike Gallagher, director of research at Continuum Economics, said the market action implies equities could fall about 5% from recent highs — or “a bit more.”

He told CNBC’s “Squawk Box Europe” that the sell-off is “natural profit taking” following a strong market run since April.  

It all comes on the backdrop of AI bubble fears and the market holding tight for Nvidia’s third-quarter earnings, which are due after Wednesday’s close. Nvidia is seen an important bellwether for the AI industry as many of the largest players rely on its GPUs.  

The recent earnings seasons shows that the big hyperscalers are still getting lots of revenue coming through 2026-27, Gallagher said, adding that investors are watching Meta closely because without a server business it serves as an indicator of whether the next wave of AI applications can deliver revenue. “That suggests this is just a routine, healthy correction,” he said.

Tema ETF Chief Investment Officer Yuri Khodjamirian put the sell-off down to a “healthy dose of skepticism” as the market realized that the mega-deals announced over summer need to actually be funded somehow. He pointed to OpenAI’s “massive announcements of commitments to spending on GPUs, power data centers,” and said “the market is starting to realize that this is going to maybe be a slower process than they thought in the summer.”  

“There is this kind of balancing going on in the market, and this is what you’re seeing in some of these shares. Oracle‘s share price is back to where it was pre-the OpenAI announcement, so we think it’s reasonably healthy. The dynamics continue, these data center build outs, whether you listen to Microsoft, Meta, Nvidia, etc, they’re all going in the direction of upwards. Nothing’s really stopping, so what we’re seeing is just a healthy correction, in a way, in the marketplace,” Khodjamirian told CNBC’s Silvia Amaro.

However, Gallagher noted that there is an element of de-risking amid an uncertain macro environment. Investors are uncertain about a previously-expected Fed rate cut in December, he said, adding that the central bank will “probably” now pause in the first…