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AI Stocks Take a Beating: Nvidia, Palantir Lead $1 Trillion Wipeout Despite Strong Earnings

MarketDash Editorial Team
23 days ago
The AI rally hit a speed bump this week as investors dumped artificial intelligence darlings like Nvidia and Palantir despite solid earnings reports, with the Magnificent Seven losing roughly $1 trillion in combined market value and raising questions about whether the boom went too far, too fast.

Sometimes the market just decides it's had enough of a good thing. That's what happened to AI stocks this week, which got absolutely hammered despite many of them posting solid earnings. Nvidia Corp. (NVDA) and Palantir Technologies Inc. (PLTR) led the selloff, dragging down the entire artificial intelligence complex in what can only be described as a collective reality check.

The carnage was impressive by any measure. The Roundhill Magnificent Seven ETF (MAGS) dropped 3.8% for the week, erasing roughly $1 trillion in combined market cap from mega-cap tech giants including Apple Inc. (AAPL), Microsoft Corp. (MSFT), and Tesla Inc. (TSLA). That's trillion with a T, for those keeping score at home.

What's particularly interesting here is that this wasn't driven by disappointing results. Many of these companies actually delivered strong earnings. But investors seemed to collectively decide that valuations had gotten a bit ahead of reality, and the selling pressure intensified when word spread that investor Michael Burry—yes, the guy from "The Big Short"—had reportedly opened short positions against Nvidia and Palantir. Nothing quite captures the mood like the appearance of a famous short seller.

The Broader Market Feels the Pain

The damage extended well beyond individual stocks. The Invesco QQQ Trust (QQQ) fell nearly 5% for the week, marking its worst performance since April. The iShares Semiconductor ETF (SOXX) had it even worse, plunging 7% as semiconductor stocks bore the brunt of investor skepticism about AI infrastructure spending.

Analyst chatter throughout the week highlighted rising concerns that the AI boom may have run "too far, too fast." It's the kind of phrase that makes everyone nervous because it's simultaneously obvious and unhelpful. Yes, things went up a lot. Whether that means they have to come down is the trillion-dollar question everyone's trying to answer.

Despite solid corporate earnings across many tech names, market breadth narrowed considerably. Traders rotated defensively into energy and healthcare stocks, the traditional hiding places when growth investors get nervous. Looking ahead, market participants are closely watching inflation data and central bank commentary for clues on whether the AI-driven rally can stabilize or if this correction has further to run.

The Bullish Case Persists

Not everyone's running for the exits, though. Bank of America Securities analyst Vivek Arya reaffirmed his "Buy" rating on Nvidia Corp. (NVDA), calling the stock "particularly compelling" despite the recent selloff. His reasoning is straightforward: strong order visibility in AI infrastructure should drive approximately 50% revenue growth and 70% earnings-per-share growth in 2026, and the stock is trading at roughly 24 times forward earnings. For a company with that kind of growth profile, that's not exactly expensive.

CoreWeave Inc. (CRWV) delivered some genuinely impressive third-quarter results that suggest demand for AI infrastructure remains robust. The company posted revenue of $1.36 billion, beating the $1.29 billion analyst estimate, while reporting a loss of just 8 cents per share—significantly better than the expected 37 cent loss. But here's the really interesting part: CoreWeave's revenue backlog surged to $55.6 billion, nearly doubling from the previous quarter. That's a massive pipeline of future business.

Virgin Galactic Holdings Inc. (SPCE) shares jumped after the company reported third-quarter revenue of $2.74 million, up from $1.7 million a year earlier. The company detailed progress on its next-generation Delta-class spaceplanes and confirmed that its final commercial spaceflight is scheduled for June 2025, before taking a multi-year pause to transition its fleet to the new vehicles.

Other bright spots included Advanced Micro Devices (AMD), which saw its stock jump after setting ambitious growth targets and citing "accelerating" AI momentum. BigBear.ai (BBAI) got analyst attention with expectations that its Ask Sage product could supercharge 2026 revenue. And Rocket Lab (RKLB) shares rose on a Q3 earnings beat and strong guidance, with the company noting that a new annual launch record is just days away.

The Bearish Reality Check

Of course, not every AI-adjacent company is thriving. Oklo Inc. (OKLO)—a nuclear energy startup backed by Sam Altman—posted a third-quarter loss of $0.20 per share, missing estimates for a $0.12 loss. The company logged an operating loss of $36.3 million and generated exactly zero revenue. The stock dropped sharply despite Oklo holding $410 million in cash and $773.5 million in marketable securities. Turns out investors want to see actual revenue at some point.

Rigetti Computing Inc. (RGTI) delivered mixed results that sent shares lower. The quantum computing company beat on adjusted EPS with $0.09 versus expectations, but third-quarter revenue came in at $1.95 million, missing the expected $2.04 million. More concerning for investors, management warned that meaningful commercial revenue is still years away. That's a tough message when your stock has been trading on AI hype.

USA Rare Earth Inc. (USAR) shares declined after the company reported a third-quarter loss of $0.25 per share, significantly wider than the expected $0.10 loss. The company did end the quarter with approximately $258 million in cash and no significant debt, so it's not in immediate financial distress, but the widening losses spooked investors nonetheless.

Additional disappointments came from Hyliion (HYLN), which stumbled on mixed Q3 earnings results, and Red Cat (RCAT), which posted a double miss for Q3 and cut guidance, sending shares tumbling. Meanwhile, Tesla (TSLA) saw deliveries in China hit a three-year low, raising concerns the company could post its first full-year decline in 2025.

What Happens Next

The question everyone's asking is whether this is a healthy correction in an otherwise intact bull market, or the beginning of something more serious. The optimistic view says that AI infrastructure spending is real, earnings growth is strong, and valuations aren't nearly as stretched as they were during, say, the dot-com bubble. The pessimistic view says that when Michael Burry starts shorting your sector and the stocks go down despite good earnings, maybe it's time to reassess.

The truth is probably somewhere in between. AI is transforming industries and creating enormous value, but that doesn't mean every AI stock deserves to trade at any price. Some consolidation and differentiation between winners and losers is probably healthy for the sector long-term, even if it's painful in the short term.

Investors are now watching upcoming inflation data and commentary from central bank officials to gauge whether interest rate policy might provide support for growth stocks, or if higher-for-longer rates will continue pressuring valuations. Market breadth will also be key—if defensive rotation continues and narrows even further, that's typically not a great sign for risk assets broadly.

For now, the AI trade is taking a breather. Whether it's a brief pause or the start of a longer correction remains to be seen, but this week reminded everyone that even the most compelling growth stories can experience sudden reversals when sentiment shifts. The fundamentals may be strong, but sometimes the market just needs to cool off.

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AI Stocks Take a Beating: Nvidia, Palantir Lead $1 Trillion Wipeout Despite Strong Earnings

MarketDash Editorial Team
23 days ago
The AI rally hit a speed bump this week as investors dumped artificial intelligence darlings like Nvidia and Palantir despite solid earnings reports, with the Magnificent Seven losing roughly $1 trillion in combined market value and raising questions about whether the boom went too far, too fast.

Sometimes the market just decides it's had enough of a good thing. That's what happened to AI stocks this week, which got absolutely hammered despite many of them posting solid earnings. Nvidia Corp. (NVDA) and Palantir Technologies Inc. (PLTR) led the selloff, dragging down the entire artificial intelligence complex in what can only be described as a collective reality check.

The carnage was impressive by any measure. The Roundhill Magnificent Seven ETF (MAGS) dropped 3.8% for the week, erasing roughly $1 trillion in combined market cap from mega-cap tech giants including Apple Inc. (AAPL), Microsoft Corp. (MSFT), and Tesla Inc. (TSLA). That's trillion with a T, for those keeping score at home.

What's particularly interesting here is that this wasn't driven by disappointing results. Many of these companies actually delivered strong earnings. But investors seemed to collectively decide that valuations had gotten a bit ahead of reality, and the selling pressure intensified when word spread that investor Michael Burry—yes, the guy from "The Big Short"—had reportedly opened short positions against Nvidia and Palantir. Nothing quite captures the mood like the appearance of a famous short seller.

The Broader Market Feels the Pain

The damage extended well beyond individual stocks. The Invesco QQQ Trust (QQQ) fell nearly 5% for the week, marking its worst performance since April. The iShares Semiconductor ETF (SOXX) had it even worse, plunging 7% as semiconductor stocks bore the brunt of investor skepticism about AI infrastructure spending.

Analyst chatter throughout the week highlighted rising concerns that the AI boom may have run "too far, too fast." It's the kind of phrase that makes everyone nervous because it's simultaneously obvious and unhelpful. Yes, things went up a lot. Whether that means they have to come down is the trillion-dollar question everyone's trying to answer.

Despite solid corporate earnings across many tech names, market breadth narrowed considerably. Traders rotated defensively into energy and healthcare stocks, the traditional hiding places when growth investors get nervous. Looking ahead, market participants are closely watching inflation data and central bank commentary for clues on whether the AI-driven rally can stabilize or if this correction has further to run.

The Bullish Case Persists

Not everyone's running for the exits, though. Bank of America Securities analyst Vivek Arya reaffirmed his "Buy" rating on Nvidia Corp. (NVDA), calling the stock "particularly compelling" despite the recent selloff. His reasoning is straightforward: strong order visibility in AI infrastructure should drive approximately 50% revenue growth and 70% earnings-per-share growth in 2026, and the stock is trading at roughly 24 times forward earnings. For a company with that kind of growth profile, that's not exactly expensive.

CoreWeave Inc. (CRWV) delivered some genuinely impressive third-quarter results that suggest demand for AI infrastructure remains robust. The company posted revenue of $1.36 billion, beating the $1.29 billion analyst estimate, while reporting a loss of just 8 cents per share—significantly better than the expected 37 cent loss. But here's the really interesting part: CoreWeave's revenue backlog surged to $55.6 billion, nearly doubling from the previous quarter. That's a massive pipeline of future business.

Virgin Galactic Holdings Inc. (SPCE) shares jumped after the company reported third-quarter revenue of $2.74 million, up from $1.7 million a year earlier. The company detailed progress on its next-generation Delta-class spaceplanes and confirmed that its final commercial spaceflight is scheduled for June 2025, before taking a multi-year pause to transition its fleet to the new vehicles.

Other bright spots included Advanced Micro Devices (AMD), which saw its stock jump after setting ambitious growth targets and citing "accelerating" AI momentum. BigBear.ai (BBAI) got analyst attention with expectations that its Ask Sage product could supercharge 2026 revenue. And Rocket Lab (RKLB) shares rose on a Q3 earnings beat and strong guidance, with the company noting that a new annual launch record is just days away.

The Bearish Reality Check

Of course, not every AI-adjacent company is thriving. Oklo Inc. (OKLO)—a nuclear energy startup backed by Sam Altman—posted a third-quarter loss of $0.20 per share, missing estimates for a $0.12 loss. The company logged an operating loss of $36.3 million and generated exactly zero revenue. The stock dropped sharply despite Oklo holding $410 million in cash and $773.5 million in marketable securities. Turns out investors want to see actual revenue at some point.

Rigetti Computing Inc. (RGTI) delivered mixed results that sent shares lower. The quantum computing company beat on adjusted EPS with $0.09 versus expectations, but third-quarter revenue came in at $1.95 million, missing the expected $2.04 million. More concerning for investors, management warned that meaningful commercial revenue is still years away. That's a tough message when your stock has been trading on AI hype.

USA Rare Earth Inc. (USAR) shares declined after the company reported a third-quarter loss of $0.25 per share, significantly wider than the expected $0.10 loss. The company did end the quarter with approximately $258 million in cash and no significant debt, so it's not in immediate financial distress, but the widening losses spooked investors nonetheless.

Additional disappointments came from Hyliion (HYLN), which stumbled on mixed Q3 earnings results, and Red Cat (RCAT), which posted a double miss for Q3 and cut guidance, sending shares tumbling. Meanwhile, Tesla (TSLA) saw deliveries in China hit a three-year low, raising concerns the company could post its first full-year decline in 2025.

What Happens Next

The question everyone's asking is whether this is a healthy correction in an otherwise intact bull market, or the beginning of something more serious. The optimistic view says that AI infrastructure spending is real, earnings growth is strong, and valuations aren't nearly as stretched as they were during, say, the dot-com bubble. The pessimistic view says that when Michael Burry starts shorting your sector and the stocks go down despite good earnings, maybe it's time to reassess.

The truth is probably somewhere in between. AI is transforming industries and creating enormous value, but that doesn't mean every AI stock deserves to trade at any price. Some consolidation and differentiation between winners and losers is probably healthy for the sector long-term, even if it's painful in the short term.

Investors are now watching upcoming inflation data and commentary from central bank officials to gauge whether interest rate policy might provide support for growth stocks, or if higher-for-longer rates will continue pressuring valuations. Market breadth will also be key—if defensive rotation continues and narrows even further, that's typically not a great sign for risk assets broadly.

For now, the AI trade is taking a breather. Whether it's a brief pause or the start of a longer correction remains to be seen, but this week reminded everyone that even the most compelling growth stories can experience sudden reversals when sentiment shifts. The fundamentals may be strong, but sometimes the market just needs to cool off.