Australian shares down at market open as Nvidia, bitcoin and other falling stars drag US stock market lower

The Australian share market is down almost 1.2 per cent in early trade, dragged down by a sharp plunge on Wall Street overnight.The ASX200 hit a four-month low for the Australian market, opening 0.8 per cent down after shaving 64.8 points to hit 8571.6.

The US stock market sank overnight as Nvidia and other “superstar” stocks created by the frenzy around artificial intelligence technology dimmed some more.

A trader works on the floor at the New York Stock Exchange on Monday (Tuesday AEST).Photographer: Michael Nagle/Bloomberg (Bloomberg)

In the US, the S&P 500 fell 0.9 per cent and pulled further from its all-time high set late last month.

The Dow Jones Industrial Average dropped 557 points, or 1.2 per cent, and the Nasdaq composite sank 0.8 per cent.

Nvidia was the heaviest weight on the market, as it’s often been in its last couple of tumultuous weeks. The chip company fell 1.8 per cent, while losses for other AI winners included a 6.4 per cent slide for Super Micro Computer.

Other areas of the market that had been high-momentum winners also sank. Bitcoin fell below $US92,000 ($141,000) down from nearly $US125,000 last month, for example.

That helped drag down Coinbase Global by 7.1 per cent and Robinhood Markets by 5.3 per cent.

Jensen Huang, chief executive officer of Nvidia Corp, during the keynote address at the Nvidia AI summit in Washington, DC, last month. (Bloomberg)

Critics have warned US stock market could be primed for a drop because of how high prices have shot since April, leaving them looking too expensive. Critics point in particular to stocks swept up in the AI mania, which have been surging at spectacular speeds for years.

Despite its loss overnight, Nvidia is still up 39 per cent for the year so far after it doubled in price in four of the past five years.

That has Wall Street’s spotlight on Wednesday (Thursday AEST), when Nvidia will report how much profit it made during the summer.

AI stocks have surged as much as they have because of expectations that they’ll produce huge growth in profits. If they fail to top analysts’ expectations, that would undercut one of the big assumptions that’s driven the US stock market to records.

Such high expectations extend beyond tech stocks, even if they are toughest for AI darlings.

Aramark fell 5.2 per cent after the company reported a profit for the latest quarter that fell short of analysts’ expectations.

The company, which offers food and facilities management for schools, national parks and convention centres, also said it expects an underlying measure of profit to grow between 20 per cent and 25 per cent this upcoming year.

While relatively strong, that was less than what analysts had been forecasting.

That helped offset a rise of 3.1 per cent for Alphabet, the parent company of Google, which jumped after Berkshire Hathaway said it built a $US4.34 billion ownership stake.

Berkshire Hathaway, run by famed investor Warren Buffett, is notorious for trying to buy stocks only when they look like good values while avoiding anything that looks too expensive.

Another source of potential disappointment for Wall Street is what the US Federal Reserve does with interest rates.

The expectation had been that the Fed would keep cutting interest rates in hopes of shoring up the slowing job market. Wall Street loves lower rates because they can give a boost to the economy and to prices for investments.

But questions are rising about whether a third cut for the year would come out of the Fed’s next meeting in December, something that traders had earlier seen as very likely.

The downside of lower interest rates is that they can make inflation worse, and inflation has stubbornly remained above the Fed’s 2 per cent target.

Fed officials have also pointed to the US government’s shutdown, which delayed the release of updates on the job market and other signals about the economy.

With less information and less certainty about how things are going, some Fed officials have suggested it may be better to wait in December to get more clarity.

Now that the shutdown is over, the government is preparing to release September’s delayed jobs report on Thursday (Friday AEST). That could create further swings for the market.

Data that’s very strong would likely stay the Fed’s hand on rate cuts, while figures that are very weak would raise worries about the economy.

In 2026, the Fed is likely to cut interest rates only in response to a slowing economy instead of trying to cut ahead of it, according to Barry Bannister, chief equity strategist at Stifel. That’s not as good an environment for stock prices, and Bannister said the “Fed’s ‘free lunch’ is over”.

In the bond market, the yield on the 10-year Treasury edged down to 4.13 per cent from 4.14 per cent late Friday.

In stock markets abroad, indexes fell modestly across much of Europe and Asia.

Tokyo’s Nikkei 225 slipped 0.1 per cent after the government reported that the Japanese economy contracted at a 1.8 per cent annual pace in the July-September quarter.

South Korea’s Kospi was an outlier and jumped 1.9 per cent as tech-related stocks there did well.