(MENAFN) US equities closed lower on Tuesday, driven by concerns over "excessively high valuations" in the technology sector and cautions from leading investment banks about a potential downturn in the stock market over the next one to two years.

The Dow Jones Industrial Average decreased by 0.53%, or 251.44 points, finishing at 47,085.24.

Meanwhile, the Nasdaq slid 2.04%, or 486.09 points, to settle at 23,348.64, and the S&P 500 declined 1.17%, or 80.42 points, to close at 6,771.55.

The Volatility Index (VIX), frequently referred to as the "fear index," surged 10.66%, reaching 19.00. Market participants appeared particularly focused on worries about overvalued technology shares in the US, alongside alerts from the CEOs of Goldman Sachs and Morgan Stanley regarding a potential market correction of 10% to 20%.

Despite technology firms reporting increased expenditures in artificial intelligence (AI), investors are questioning whether these investments will result in tangible profits.

The recent sharp rise in AI-related stocks has prompted some market participants to adopt a more cautious approach.

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

Ted Pick, CEO of Morgan Stanley, encouraged investors to accept periodic market declines, framing them as constructive events rather than signals of financial crisis.

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