U.S. stock futures fell Tuesday night after major indexes posted losses for a second day, helped by a drop in Nvidia shares.
Nasdaq 100 futures fell 0.16%. Dow Jones Industrial Average futures fell 7 points, or 0.02%. S&P 500 futures fell 0.06%.
In extended trading, Palo Alto Networks fell 20% after the cybersecurity company cut its full-year revenue guidance. SolarEdge Technologies lost 10%, dragged down by weak first-quarter guidance.
During the regular session, the three major indexes declined, led by a decline in the technology sector. The Nasdaq Composite lost 0.92%, while the S&P 500 fell 0.6%. The Dow Jones Industrial Average, which consists of 30 stocks, fell 0.17%.
Nvidia's decline - which fell more than 4% - weighed on the Nasdaq and S&P 500 as sentiment soured the day before the chip giant was expected to report quarterly results.
Concerns surrounding Nvidia’s lofty valuation have been growing ahead of the company’s earnings call scheduled for Wednesday after the bell. The stock has risen about 225% over the past year.
The broader tech sector is now overvalued, according to Alex McGrath, chief investment officer at NorthEnd Private Wealth. He believes Tuesday’s sell-off in Nvidia and other big tech names could mean investors are coming to terms with the greater fool theory — when overvalued assets continue to rise because enough investors are willing to pay more, until there are no more left.
“People kept paying higher and higher prices for the tech sector throughout [the rally]. That was supposed to be an allocation to the underlying assets, but as we move forward with this, the bigger question is: When do you start to cut back? And with Nvidia’s move today, I think that’s what you’re seeing,” McGrath said.
