Global Markets Reel Amid US Economic Jitters and Tech Valuation Concerns

Global stock markets experienced a significant downturn on Friday, November 7, 2025, as investors reacted to mounting concerns over the health of the US economy and potentially overvalued technology stocks. Major indices, including the Nasdaq Composite, S&P 500, and Dow Jones Industrial Average, all recorded declines, signaling widespread market apprehension, as reported by The Guardian.

The tech-heavy Nasdaq Composite saw a notable drop of 1.9%, with the S&P 500 falling 1.1% and the Dow Jones Industrial Average slipping 0.7% on Friday. This sell-off was exacerbated by a sharp decline in major artificial intelligence (AI) stocks, which collectively lost over $1 trillion in market value, according to The Economic Times.

A primary catalyst for this market volatility is a significant drop in US consumer confidence, which plunged to a near-record low in November. The University of Michigan's consumer sentiment index fell to 50.3, down from 53.6 in October, marking its lowest point since June 2022, as detailed by The Guardian.

Adding to economic anxieties, US-based employers announced 153,074 job cuts in October, a substantial 175% increase compared to the same period last year. This figure represents the highest level of layoffs for any October since 2003, according to a report from Challenger, Gray & Christmas.

The ongoing federal government shutdown, now exceeding a month, has further clouded the economic outlook by creating a "blackout" on crucial official data. This lack of information is making investors nervous and complicating the Federal Reserve's ability to assess the economy, as noted by The Guardian.

Concerns about an "AI bubble" bursting are also intensifying, with analysts questioning the sustainability of high valuations for technology companies. This sentiment was evident as major AI players like Nvidia and Palantir experienced significant plunges, as reported by The Economic Times.

The market's reaction underscores a growing skepticism about the future earnings potential of these high-growth sectors amidst broader economic headwinds. The confluence of these factors suggests a challenging period ahead for investors navigating an uncertain landscape, according to investing.com.

• Background Context: The current market turbulence follows a period of robust gains, particularly in the tech sector, driven by optimism surrounding artificial intelligence. Morningstar noted that eight of the top ten largest stocks by market capitalization are directly tied to the AI boom, indicating a high concentration of market value in this area. However, this rapid ascent had already led some bank bosses to warn of a potential serious stock market correction, as reported by The Guardian earlier in November.

• Consumer Sentiment Decline: The University of Michigan's consumer sentiment index dropped to 50.3 in November, a level last seen during the historic inflation of 2022, according to morningstar. Joanne Hsu, director of the survey, stated that consumers are expressing worries about potential negative consequences for the economy due to the prolonged government shutdown. This widespread decline in sentiment was observed across various age, income, and political groups, as highlighted by Binance.

• Surge in Job Cuts: US employers announced 153,074 job cuts in October, nearly triple the number from the previous year, with year-to-date layoffs exceeding 1 million, the highest since the pandemic, according to CBS News. Andy Challenger, chief revenue officer for Challenger, Gray & Christmas, indicated that AI adoption, softening consumer spending, and rising costs are key drivers, making it harder for laid-off individuals to secure new roles.

• AI Valuation Concerns: The "AI bubble" shows clear signs of bursting, with the Bloomberg AI Index correcting approximately 4% after a significant surge, as detailed by The Economic Times. Nvidia plunged over 4% after the US barred sales of its AI chips to China, while Palantir also saw declines, intensifying worries about overstretched valuations in the sector, according to investopedia.

• Impact of Government Shutdown and Data Blackout: The extended federal government shutdown has resulted in a "blackout" of official economic data, including the monthly jobs report, which was due on Friday. This lack of information is forcing investors and the Federal Reserve to rely on privately funded research, creating significant uncertainty, as noted by The Guardian. Fed board member Austan Goolsbee expressed caution about further interest rate cuts in this "foggy" environment, according to The Guardian.

• Interest Rate Environment: The Federal Reserve has been cutting interest rates, with the target federal funds rate now between 3.75% and 4.00% after cuts in September and October 2025, as reported by U.S. Bank. While rate cut expectations have generally supported markets, the tech-heavy Nasdaq is particularly sensitive to interest rate changes, as higher borrowing costs can reduce corporate profits and valuations for growth stocks, according to bookmap.

• Broader Economic Implications: Deloitte predicts US GDP growth will slow to 1.6% in 2025, down from 2.8% in 2024, with inflation potentially reaching 4% by year-end due to higher import costs and tariffs. J.P. Morgan Research, while reducing the probability of a US recession to 40%, still anticipates a period of sub-par growth, especially given the potential impact of US tariff shocks.

• Global Market Contagion: The market jitters were not confined to the US; Asian markets also experienced slides on November 7, mirroring Wall Street's declines. Tech-heavy markets in Japan and South Korea led regional losses, driven by intensified fears of an AI bubble burst, as reported by IC Markets. This indicates a global interconnectedness of market sentiment, particularly concerning the technology sector.