S&P500 halts three-day winning streak…AI fever cools, causing decline [New York Stock Market Morning Briefing]

Sharp drops in Nvidia and Oracle amid concerns over investment structure and energy supply

Powell: "Stock prices are fairly highly valued"…path to rate cuts uncertain

Investors on alert for PCE data and shutdown possibility

The S&P500's recent consecutive gains have been halted. Doubts about the sustainability of the artificial intelligence (AI) rally have unsettled investors.

On the 23rd (local time) at the New York Stock Exchange, the Dow Jones Industrial Average closed at 46,292.78, down 88.76 points (0.19%) from the previous session. The S&P500 closed at 6,656.92, down 36.83 points (0.55%), and the Nasdaq closed at 22,573.47, down 215.50 points (0.95%).

That day, Nvidia's stock fell 2.8% from the previous day. The prior day's announcement of a $100 billion investment in OpenAI had driven sharp gains in the stock and the broader market, but it reversed course in a day. CNBC reported, "Some investors have pointed out that this investment structure is similar to the customer-supplier relationships during the dot-com bubble," and "other investors questioned whether sufficient energy could be secured to support the growth plans of the two major AI companies."

Oracle's decline was larger. Its stock had surged more than 50% over the past three months thanks to optimistic AI revenue forecasts, but it fell 4.4% that day.

Gil Luria, head of technology research at D.A. Davidson, said, "Nvidia's OpenAI investment news was initially received positively, but investors soon realized that Nvidia could effectively be the 'last remaining investor,'" and, "OpenAI made commitments far beyond what it could afford, and Nvidia might have been the only equity investor able to support them."

Jerome Powell, chair of the U.S. Federal Reserve (Fed), said that "stock prices are fairly highly valued," highlighting valuation concerns. He also said the path to rate cuts is not clear and described the situation as "challenging."

However, the overall market decline was limited. The Russell 2000, an index of small- and mid-cap stocks, hit an intraday record high reflecting last week's expectations of Fed rate cuts, but it ultimately closed down 0.2%.

Investors are awaiting the personal consumption expenditures (PCE) price index due on the 26th. It is the Fed's preferred inflation gauge. Investors are also watching the possibility of a federal government shutdown ahead of the September 30 expiration of government funding. The Senate last week rejected temporary funding measures from both the Republican and Democratic parties. That day, President Trump canceled a scheduled meeting with congressional Democratic leadership, saying, "it could not be a productive meeting," adding to the uncertainty.

New York = Shin-young Park, correspondent nyusos@hankyung.com