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Nvidia ( NVDA ) shares, equity indexes turn lower after initial

gains

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Doubts on Fed cut in Dec also weigh, following jobs data

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Concerns over concentration in tech stocks persist

(Recasts throughout for market downturn, adds quotes)

By Lewis Krauskopf and Dhara Ranasinghe

NEW YORK/LONDON, Nov 20 (Reuters) -

Nvidia Corp's ( NVDA ) strong earnings report offered only a brief

reprieve from worries that have plagued stocks about the return

on relentless artificial intelligence investment and lofty

valuations on Wall Street.

AI darling Nvidia ( NVDA ) on Wednesday surprised Wall

Street with accelerating growth after several quarters of

slowing sales and a fourth-quarter forecast that exceeded

expectations.

Initial relief across world stocks, however, turned sour on

Thursday as investors refocused on the negatives that pulled the

benchmark S&P 500 and tech-heavy Nasdaq Composite off

record highs hit late last month. Investors also grappled with

the delayed release of September payrolls data that solidified

the belief that the Federal Reserve would not lower interest

rates for a third straight meeting in December.

"This is a coordinated risk off trade - tech stocks,

crypto, etc on worries about valuations and leverage," said

Nationwide Chief Market Strategist Mark Hackett. "The fact that

it is an intraday decline rather than a drop at the open

suggests exhaustion."

Nvidia's ( NVDA ) upbeat results did not dispel concern around a

fall back to earth for highly-valued tech stocks, amid lingering

concerns about whether AI spending will pay off.

Nvidia's ( NVDA ) results "are encouraging and support the AI story,"

said Angelo Kourkafas, senior global investment strategist at

Edward Jones. "But ... I think there's broad skepticism over the

next one-to-three years whether AI is going to be able to

deliver on the return side."

Global stocks have now dropped over 3% this month in part

driven by concerns that a rally in tech shares has gone too far,

too fast.

"The concerns around tech will persist and each quarter we

are likely to come across the same concerns as markets question

the concentration," said Seema Shah, chief global strategist at

Principal Global Investors in London.

"That story won't go away."

Shah said that while she was overweight U.S. stocks, she was

also wary of concentration risks and this was one reason why she

was looking at European shares.

AI COMPANY RESULTS AS IMPORTANT AS DATA PRINTS

Investors and analysts say that as AI emerges as a so-called

mega-trend, market sentiment hangs on earnings results from

chipmaker Nvidia ( NVDA ), a bellwether for the AI build-out, and other

technology companies. They are as key to shaping views on the

economic outlook as monthly economic releases.

Nvidia's ( NVDA ) shares were down over 2% after rallying sharply in

early trade. The S&P 500 was off 1.2% and the Nasdaq was down

1.7% after both had climbed sharply earlier. MSCI's index of

global shares was off 0.7%.

Morgan Stanley on Thursday said it scrapped its forecast

that the Fed would cut interest rates by a quarter-point at its

December meeting after the Labor Department released data

showing a

greater-than-expected 119,000 non-farm payrolls increase

in September. The report was more than a month late due to

the government shutdown.

"It's a sense that the Fed is still driving in the fog

and we're not going to get any support from monetary policy in

the short term," said Art Hogan, chief market strategist at B.

Riley Wealth. "I think that's been a larger influence (in the

market today) than the questioning about AI valuations."

"The positive here is the most speculative fringes of

the market are getting a much-needed sell-off."

Fed Governor Lisa Cook didn't help sentiment, saying

that historically elevated prices in equities, corporate bonds,

housing and leveraged-loan markets may portend a large pullback

in valuations.

AI, TECH STOCK CONCERNS REMAIN

Thursday's action showed that investors need to brace

for a bumpy ride.

"Investors do need to worry about bubble risks," Mark

Haefele, chief investment officer at UBS Global Wealth

Management, told reporters on a call about the 2026 outlook on

Thursday.

The so-called "Magnificent Seven" - including Nvidia ( NVDA ) and

Meta - have seen their share prices soar over the past

several years, fuelling fears about the scale of market exposure

to just a few names.

Technology firms are among the stock market's big fallers in

recent days, although they are still well up on the year.

The S&P 500 tech sector's forward price/earnings ratio - a

measure of how much a company is worth compared to future

earnings - was recently about 30 times, well above its 10-year

average of 22.2.

The AI stocks frenzy has drawn comparisons with the 1990s

dotcom boom and bust, while concerns were rising about debt

taken on by tech firms.

Nvidia ( NVDA ) produced $60 billion in free cash flow over the past

12 months, David Trainer, CEO of investment research firm New

Constructs, said in a note. To justify its current stock price,

it would need to produce $2.1 trillion in annual cash flows

within 10 years, he said.

On Wednesday, speaking before the Nvidia ( NVDA ) results, Amundi,

Europe's biggest asset manager, said it was underweight megacap

stocks.

While it had not sold down the stocks in most portfolios, it

has been hedging with derivatives that give it the option to

sell them instead, Amundi's CIO, Vincent Mortier, said.