Nasdaq Plunges Over 400 Points as AI Stocks Tumble, Fear and Greed Index Shifts to 'Fear' Zone

On December 17, 2025, the Nasdaq Composite Index dropped 1.91% (over 400 points) to close at $22,693.32, marking its worst day in nearly a month and extending a four-day losing streak [0][1][2][3]. The decline was led by AI-related stocks, with major players like NVIDIA (NVDA) falling 2.93% (to $170.94) and Alphabet (GOOGL) dropping 3.67% (to $296.72), while Apple (AAPL), Meta Platforms (META), and Microsoft (MSFT) also saw mixed but mostly negative performance [0]. The S&P 500 (-1.16% to 6,721.43) and Dow Jones Industrial Average (-0.47% to 47,885.97) also declined, with energy stocks and defensives outperforming to provide mild support to the Dow [1][2].

Key catalysts for the sell-off include jitters over AI infrastructure funding timelines and payoffs [1], valuation concerns in the AI sector [2], and a UBS survey indicating only 17% of large businesses are using AI at scale—tempering expectations for 2026 AI revenue growth [2]. The CNN Money Fear and Greed Index shifted to the “Fear” zone, reflecting a broad decline in investor sentiment towards high-growth AI stocks [3]. Volume for NVIDIA reached 221.07 million shares, above its 20-day average of ~180 million, indicating significant selling pressure in this bellwether AI stock [0].

1. The sell-off follows strong year-to-date gains for the Nasdaq (~35% through December 17), suggesting profit-taking may have amplified the decline [0].
2. The shift in the Fear and Greed Index from neutral to “Fear” indicates sentiment change is not isolated to AI stocks but reflects broader market caution.
3. Sector rotation to energy and defensives highlights a shift towards risk-averse behavior among investors.
4. Upcoming U.S. CPI data (December 18, 2025) could further impact growth stocks, as rate cut expectations remain a key market driver [1].

• AI Valuation Vulnerability
  : High-growth AI stocks may face further corrections if adoption rates continue to lag expectations [2].
• Monetary Policy Uncertainty
  : Hotter-than-expected inflation could delay rate cuts, pressuring growth stock valuations [1].
• AI Funding Systemic Risks
  : Interconnected financing arrangements between cloud providers and AI labs may create risks if funding cycles slow [1].

• Potential buying opportunities may emerge if the sell-off overcorrects, particularly for high-quality AI companies with strong fundamentals.
• Defensive sectors and energy stocks may continue to outperform amid ongoing market caution.

This analysis covers the December 17, 2025, market decline led by AI stocks, with the Nasdaq dropping over 400 points and the Fear and Greed Index entering the “Fear” zone. Critical data includes the 1.91% Nasdaq decline, 2.93% drop in NVIDIA (with above-average volume), and sector rotation to defensives. Catalysts include AI adoption and valuation concerns, a UBS survey, and upcoming inflation data. Factors to monitor include U.S. CPI data (December 18), corporate AI adoption metrics from future earnings reports, and Fed commentary on monetary policy [1][2][3].