EBC Markets Briefing | AI reckoning may have begun

The Nasdaq 100 fell into correction territory on Friday, wiping out more than $2 trillion in value in just over three weeks, as traders unwound bets that had been minting money for over a year.

Several mega caps have seen concentrated selling, with both Nvidia and Tesla down more than 20% from recent highs, putting them in bear-market territory. Microsoft and Amazon have each lost more than 10%.

Some analysts have been concerned that the tech stocks could be overblown by courtesy of the AI fever. That case was cemented by earnings disappointment though the latest NFP report as boosted rate-cut odds.

Strong cloud growth across the board has not warranted heavy spending on data centres and other AI infrastructure. The S&P 500’s information technology index trades at its highest multiple since 2002.

The backlash also raised fears for chipmakers that have arguably benefited most from the speculation. The industry needs to show the technology is capable of solving increasingly complicated tasks.

The VIX is at its highest in more than a year. Investors are pocketing their gains from the Magnificent Seven, which accounted for much of the market’s first-half advance, and fleeing to previous laggards.

The Nasdaq 100 risks breaking below the 200 EMA. If we finally see that happen, the index will likely plunge to the low around 17,000 hit in 19 April.

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