Global Equity Markets Decline Amid AI Valuation Concerns and Bond Market Pressures

World equity markets continued their downward spiral in early November 2025, with investors growing increasingly wary of overvaluation in the AI sector and shifting expectations around monetary policy. The Nikkei 225 in Japan dropped by 3%, marking its largest single-day decline since early April. Meanwhile, the S&P 500 closed below a critical technical level, deepening concerns about the sustainability of recent market gains. These moves reflect a broader global trend, with European and Asian markets also experiencing significant losses.

Global Equity Selloff Intensifies

The sell-off, which began in Asia and continued across Europe, extended into U.S. markets, where the S&P 500 closed below its 50-day moving average for the first time since late April. This technical breakdown has raised alarm among investors and analysts, signaling a potential correction in the market. The index’s recent performance has been heavily influenced by the artificial intelligence sector, with major players like Nvidia and Amazon drawing scrutiny over valuations and debt-funded infrastructure spending.

The Nikkei 225, one of the most significant barometers of global investor sentiment, plummeted 3% on the day, shedding much of the recent gains driven by Prime Minister Sanae Takaichi’s stimulus policies. Technology and AI-linked stocks were the hardest hit, with companies like Tokyo Electron and Advantest falling by over 4%. The market’s sharp reversal came as investors began to question the long-term profitability of AI investments, particularly as these companies continue to rely heavily on debt to fund data center construction and research.

AI Valuations and Market Sentiment

Concerns over AI valuations have dominated market sentiment in recent weeks. Sundar Pichai, CEO of Alphabet, warned that the AI boom, while promising, carries the risk of irrationality and overinvestment. He noted that no company would be immune if the sector faced a correction. The warning resonated across the market, especially as tech firms like Nvidia and Amazon have been central to the recent rally.

Nvidia, the largest stock in the S&P 500 by market capitalization, has seen its shares fall nearly 10% in the past month, triggering concerns about its influence on the index. With the company’s earnings report expected later in the week, investors are closely watching for signs of whether the AI-driven growth is translating into sustainable profits. The performance of AI-related stocks has been closely tied to investor expectations for future growth, and any deviation from these assumptions could lead to further volatility.

The broader market also saw declines in companies beyond the AI sector. For example, Home Depot fell 6% after reporting weaker-than-expected earnings, highlighting the vulnerability of consumer-facing businesses to shifting demand and economic uncertainty.

Bond Market Pressures and Rate Outlook

Market participants are also adjusting to shifting expectations around interest rate policy. The likelihood of a December rate cut by the Federal Reserve has dropped to 41%, down from 43% the previous week. This decline reflects growing uncertainty among investors about the central bank’s next move, particularly in light of delayed economic data from the recent government shutdown. A strong jobs report is now seen as more likely to delay rate cuts, which could exacerbate pressure on growth-sensitive assets like equities and cryptocurrencies.

The bond market has also seen volatility, with the yield on the 10-year Treasury dipping slightly to 4.11%. As investors weigh the risk of further rate cuts against the potential for inflation to remain stubbornly above the Fed’s 2% target, fixed-income assets have become more attractive as a hedge against equity market declines.

Cryptocurrency Market Retreat

The cryptocurrency market has also experienced a sharp correction, with Bitcoin hitting a seven-month low below $90,000. The global cryptocurrency market cap has dropped by approximately $1.2 trillion in the past six weeks, as investors have shifted away from speculative assets amid broader risk-off sentiment. The decline in Bitcoin’s price has mirrored the sell-off in AI and tech stocks, as both sectors have been viewed as highly correlated in terms of investor sentiment and macroeconomic exposure.

The decline of Bitcoin and other cryptocurrencies has been exacerbated by fears of overvaluation in the technology sector and concerns about the sustainability of AI infrastructure spending. With major tech firms raising billions in debt to fund AI expansion, investors are becoming more cautious about the financial implications of these developments.

Looking Ahead

With the upcoming release of Nvidia’s earnings and the delayed U.S. jobs report, market participants will be closely watching for any new developments that could influence the trajectory of the current selloff. The performance of the S&P 500 and the Nasdaq in the coming days will be critical in determining whether this correction turns into a broader market downturn.

In the near term, the focus will remain on AI valuations, monetary policy, and the ability of companies to monetize their AI investments. As the market continues to navigate these challenges, investors are advised to remain cautious and to assess their exposure to high-growth sectors.