Wall Street’s AI Rally Pauses After Nvidia Milestone as Meta, Tesla, Oracle Fall

Wall Street's once-unstoppable AI trade has hit a significant snag following Nvidia's historic milestone of becoming the first company to reach a $5 trillion market capitalization on October 29, 2025, prompting speculation about a so-called "$5 Trillion Curse" that has triggered sharp corrections across the sector. Since that peak, Nvidia's shares have declined nearly 10%, erasing substantial year-to-date gains and signaling potential profit-taking among investors who had piled into AI-driven equities amid explosive growth in generative AI technologies.

The downturn extends beyond Nvidia, with key beneficiaries of the AI boom like Oracle tumbling 20%, Meta Platforms dropping almost 20%, Palantir Technologies correcting by 14%, and Elon Musk's Tesla falling 11.4%. Advanced Micro Devices (AMD), Nvidia's closest rival, and Broadcom have also shed around 10% each, reflecting broader unease in semiconductor and software stocks tied to artificial intelligence infrastructure.

High-profile investor moves have amplified the sell-off, underscoring shifting sentiment in the AI frenzy that propelled Nvidia's valuation surge over the past two years. Michael Burry, the famed investor known for predicting the 2008 financial crisis, has placed bets against both Nvidia and Palantir after deregistering his asset management firm, while PayPal co-founder Peter Thiel has fully exited his Nvidia position. SoftBank, a major backer of AI ventures, offloaded $5.8 billion worth of Nvidia shares in recent weeks, citing portfolio rebalancing amid elevated valuations. These actions come as market liquidity tightens, with analysts pointing to overextended rallies and rising interest rate pressures as catalysts for the pullback, reminiscent of past tech bubbles where rapid hype gave way to reality checks.

The ripple effects have dragged down major indices, with the Nasdaq Composite—home to many AI heavyweights—falling 5.2% since Nvidia's milestone, the S&P 500 declining 3.2%, and the Dow Jones Industrial Average slipping 2.2%. This marks a stark contrast to the AI-fueled optimism of early 2025, when Nvidia's dominance in graphics processing units (GPUs) essential for AI training drove trillions in market value creation across the Magnificent Seven tech giants.

However, with enterprise AI adoption slowing in some quarters due to high implementation costs and uncertain returns, investors are reassessing whether the sector's growth justifies its premiums, potentially ushering in a more selective phase of capital allocation.

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As the dust settles on this correction, questions loom over the sustainability of the AI trade's next chapter, with strategists warning that prolonged weakness could test corporate earnings and innovation pipelines. Nvidia, despite the dip, remains a linchpin in data center expansions by hyperscalers like Microsoft and Amazon, but the "$5 Trillion Curse" narrative highlights the risks of milestone-chasing in volatile markets. For now, the sector's fate hinges on upcoming quarterly reports and macroeconomic cues, as Wall Street navigates between AI's transformative promise and the perils of overvaluation.

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