AI Stock Market Selloff Analysis: Technology Sector Correction on November 4-5, 2025

This analysis is based on the Reuters report [1] published on November 5, 2025, covering the significant selloff in AI and technology stocks that began on November 4, 2025.

The technology sector experienced a pronounced correction on November 4, 2025, with AI-related stocks bearing the brunt of the selling pressure. The selloff was triggered by an unexpectedly negative market reaction to Palantir Technologies’ strong Q3 earnings results, despite the company beating Wall Street estimates [1]. This reaction extended into Asian markets on November 5, with Seoul and Tokyo indices falling approximately 5% from their recent peaks [1].

• Nasdaq Composite declined 0.47% to 23,348.64 [0]
• S&P 500 fell 0.25% to 6,771.54 [0]
• Dow Jones decreased 0.13% to 47,085.25 [0]
• Technology sector overall down 0.50% [0]

• NVIDIA (NVDA) closed at $198.69 (-3.96%), down approximately 7% from last month’s peak [0][1]
• Palantir (PLTR) closed at $190.74 (-7.94%), with an 8% decline on Tuesday and additional 3% drop in extended trading [0][1]

Trading volumes surged significantly, with NVIDIA reaching 185.78M shares (above average of 177.80M) and Palantir surging to 119.81M shares (nearly double its average of 61.23M) [0], indicating heightened market activity and participant engagement.

The selloff reflects growing concerns about stretched valuations in the AI sector. Palantir trades at over 200 times forward earnings [2], while NVIDIA maintains a P/E ratio of 56.45 with a $4.84 trillion market cap [0]. Both companies have seen substantial gains in 2025, with Palantir up over 150% year-to-date [2].

Market analysts characterize this as a

rather than fundamentally motivated selloff [1]. Key observations include:

• Profit-taking behavior
  : Fund managers locking in gains ahead of year-end [1]
• Short-term nature
  : Described as a
  “classic position-unwind and profit-taking day”
  [1]
• Market health
  : Analysts characterize the move as
  “healthy”
  rather than panic-selling [1]

The selloff demonstrated clear contagion effects from US markets to Asian trading sessions, with Seoul and Tokyo indices experiencing significant declines [1]. This suggests the AI valuation concerns are not isolated to US markets but represent a global reassessment of technology sector valuations.

Michael Burry’s revelation of over $1 billion in put options against both NVIDIA and Palantir, comparing the current AI boom to the 2000 dot-com bubble [3], likely amplified market nervousness. The public exchange between Burry and Palantir’s CEO Alex Karp, who stated

[2], added to market volatility.

Recent warnings from Morgan Stanley CEO Ted Pick and Goldman Sachs CEO David Solomon about potential market pullbacks at an investment summit in Hong Kong [1] provided institutional validation for the correction, potentially encouraging more systematic profit-taking.

1. Valuation Sustainability
   : Current AI stock valuations may be unsustainable if growth expectations are not met [2][3]. Palantir’s 200+ forward P/E ratio and NVIDIA’s elevated multiples suggest significant downside risk if growth slows.

2. Historical Bubble Comparisons
   : Parallels to the 2000 dot-com bubble indicate potential for significant corrections if AI adoption rates fail to meet market expectations [3].

3. Concentration Risk
   : The heavy concentration of gains in a few AI stocks creates systemic risk for technology-heavy portfolios, potentially amplifying market volatility.

1. Selective Entry Points
   : Some investors, like Matthew Haupt of Wilson Asset Management, are actively buying during the dip [1], suggesting perceived value at current levels for disciplined investors.

2. Market Stabilization
   : The characterization of the selloff as “healthy” rather than panic-driven [1] suggests potential for stabilization and recovery as positions normalize.

• Institutional flow patterns and re-emergence of buying at lower levels
• Options market sentiment indicators and put/call ratios
• Follow-through selling patterns or stabilization signals

• Q4 earnings results from major AI companies
• Federal Reserve policy impact on technology valuations
• Competitive dynamics in AI chip and software markets

• Actual AI adoption rates versus market expectations
• Regulatory developments affecting AI companies
• Supply chain resilience for AI-related hardware

The current selloff appears to be a

rather than a fundamental breakdown, according to multiple analysts [1]. However, several factors warrant careful consideration:

• Market Context
  : The correction follows significant year-to-date gains, with Palantir up over 150% in 2025 [2], suggesting natural profit-taking after extended rallies.

• Volume Analysis
  : Elevated trading volumes [0] indicate strong market participation but also suggest heightened volatility and potential for continued price discovery.

• Institutional Positioning
  : The selloff’s characterization as positioning-driven [1] suggests institutional rebalancing rather than retail panic, potentially indicating a more measured correction.

• Valuation Metrics
  : Current multiples (Palantir at 200+ forward P/E, NVIDIA at 56.45 P/E) [0][2] suggest markets have priced in significant growth expectations, creating vulnerability to disappointment.

• Global Impact
  : The extension of selling pressure to Asian markets [1] indicates broad-based reassessment of AI valuations across global markets.

The analysis suggests this is primarily a valuation and positioning correction rather than a fundamental crisis in the AI sector. However, the elevated valuations and historical bubble comparisons warrant careful monitoring of adoption rates and earnings performance in coming quarters.