Nasdaq Drops as Wall Street Faces Reality Check

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•  04 Nov 2025
 

•   AMD  
   
  -0.74%
•   AMZN  
   
  +0.05%
•   HTZ  
   
  -1.17%
•   NVDA  
   
  -0.46%
•   PLTR  
   
  +1.68%

Wall Street just handed investors a sobering reminder that what goes up doesn't always keep going up. The market closed deep in the red Tuesday, with the Nasdaq tumbling 2%, the S&P 500 down 1.2%, and even the Dow shedding half a percent. For anyone who's been riding the AI wave this year, this pullback hits differently.

$PLTR took one of the hardest punches, dropping 9% despite actually raising its guidance. Think about that for a second. Palantir just reported 63% revenue growth to $1.8 billion, crushed expectations with 77% growth in its US business, and lifted its full-year forecast to $4.4 billion. The numbers were exceptional by any measure. Yet the stock tanked anyway. That's the kind of market we're in right now, where even winning isn't enough if you've already won too much.

Palantir has been nothing short of extraordinary, up nearly 400% over the past year as its AI-powered data analytics platform became the darling of both government agencies and corporate America. But when you climb that high that fast, the air gets thin. Investors clearly decided the bar was set too high, the valuation too stretched, the expectations too demanding. Sometimes the punishment for success is having to prove you can succeed even more.

$NVDA felt the pressure too, sliding lower after news broke that fund manager Michael Burry opened short positions against both Nvidia and Palantir. Whether Burry's bet pays off or not, the psychological impact is real.

The crypto market amplified the anxiety. Bitcoin dropped over 5%, threatening to break below the psychologically critical $100,000 level. Ethereum fell 11%, sliding toward $3,000. For traders who've been toggling between tech stocks and digital assets, there was nowhere to hide. The correlation between risk assets tightened exactly when you needed diversification most.

Senior executives at Capital Group, Goldman Sachs, and Morgan Stanley have been sounding warnings for weeks. Their message: this market needed a breather. Sentiment indicators were flashing overheated. Technical measures suggested we'd come too far too fast. And crucially, the gains had concentrated so heavily in big tech that the rally started feeling fragile rather than robust.

The timing makes sense when you step back. The S&P just finished one of its best six-month runs since the 1950s, fueled by three powerful tailwinds: a resilient US economy that refused to crack, expectations of continued Fed rate cuts, and genuine excitement around artificial intelligence. Those are real, legitimate drivers. But markets don't move in straight lines, and valuations matter eventually.

Matt Maley from Miller Tabak captured the mood perfectly "The stock market is ripe for a meaningful near-term correction, even if the longer-term trend remains positive" That's not bearish so much as realistic. After a run like we've seen, a 5% pullback wouldn't signal the end of the bull market. It would signal the market is functioning normally.

Some stocks bucked the trend. $HTZ surged 37%, though rental car companies aren't exactly where most growth investors are focused right now. $AMD fell 2.3% ahead of earnings, with analysts expecting $1.17 per share on $8.76 billion in revenue. Morgan Stanley thinks AMD could deliver a strong quarter in data centers, partly because Intel supply constraints are pushing customers toward alternatives.

$TSLA dropped 5% after Norway sovereign wealth fund, one of the world largest investors, announced it would vote against Elon Musk proposed compensation package. It's the first major shareholder to publicly oppose the deal, adding another layer of complexity to a stock that's already navigating production challenges and increased competition.

$SHOP reported 32% revenue growth to $2.84 billion, beating estimates, yet the stock fell 5%. Net income dropped to $264 million, and investors focused on the profit decline rather than the top-line strength. The company processed $92 billion in merchandise volume and projected up to 30% growth next quarter, but none of that mattered in a market suddenly allergic to paying premium multiples.

Even $AMZN, which hit an all-time high of $254 on Monday after announcing a massive $38 billion cloud deal with OpenAI, gave back 2%. Sometimes good news gets you to the peak, and then the peak becomes the place to sell.

The ten-year Treasury yield dropped three basis points to 4.09%, and the dollar strengthened to its highest level since May. That combination suggests investors were repositioning, moving from risk assets into safer harbors without panicking into full defensive mode.

This isn't about abandoning the thesis. It's about acknowledging that markets need to digest gains, that corrections are healthy, and that the best opportunities often come when sentiment swings from euphoria to caution. If you believed in these companies at lower prices, a pullback might be a gift rather than a disaster. The question is whether you have the conviction to act on that belief when the momentum reverses and everyone around you is suddenly nervous.

The market is testing you right now, separating those who understand the underlying businesses from those who were just riding momentum. Which one are you?

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