ISTANBUL

US stocks ended lower on Tuesday on concerns over excessively high valuations in the tech sector and warnings from major investment banks of a possible correction in equities markets in the next 1-2 years.

The Dow Jones Industrial Average fell 0.53%, or 251.44 points, to close at 47,085.24.

The Nasdaq dropped 2.04%, or 486.09 points, to close at 23,348.64, while the S&P 500 dipped 1.17%, or 80.42 points, to 6,771.55.

The Volatility Index (VIX), also known as the "fear index," climbed 10.66% to 19.00.

Investors were reportedly focused on concerns about overvalued shares in the US tech sector and warnings by the CEOs of Goldman Sachs and Morgan Stanley of a possible 10% to 20% market correction.

While technology companies' balance sheets show increased investments in artificial intelligence (AI), questions have once again surfaced about whether these investments will translate into profits. This has led some investors to exercise caution following the rapid rise in AI stocks.

“It’s likely there’ll be a 10% to 20% drawdown in equity markets sometime in the next 12 to 24 months,” said Goldman Sachs CEO David Solomon at the Global Financial Leaders’ Investment Summit in Hong Kong. “Things run, and then they pull back so people can reassess.”

Ted Pick, CEO of Morgan Stanley, advised investors to embrace sporadic declines, characterizing them as positive developments rather than crisis indicators.

“We should also welcome the possibility that there would be drawdowns, 10% to 15% drawdowns that are not driven by some sort of macro cliff effect,” he said.

Palantir's stock fell 8% despite the software company's strong guidance and third-quarter earnings that were above Wall Street's projections, driven by development in its AI division.

Oracle saw a 3.8% decline, eroding part of its over 50% gain this year. After more than doubling this year, chipmaker AMD also had a more than 3.7% decline. Also, Amazon fell 1.8% and Nvidia was down 4%.

Shares of transportation app Uber also fell 5.1%, despite reporting better-than-expected third-quarter earnings.

Meanwhile, tech giant IBM’s shares fell 1.4% after the firm told CNBC that it will cut "a low single-digit percentage" of its global workforce in the fourth quarter, which would amount to thousands of employees.

Meanwhile, the US federal government shutdown, which is about to be the longest in history, continues disrupting the release of critical economic data. The lack of economic data releases adds to uncertainty, and private sector employment data, due to be released on Wednesday by ADP, is a key focus for investors.