Is this pullback in the AI computing leader really the start of a major sell-off?
The action at the US market open today is pretty interesting—a real tale of two extremes. The Dow surged to 51,922 points, up 0.58%, while the Nasdaq was hammered, falling 1.31%. The S&P 500 slipped 0.47%.
Chip stocks were hit across the board: $AMD plunged 5.4%, $INTC fell 4.6%, and $NVDA followed with a 2.71% pullback. Chinese stocks listed in the US, including $BABA and $BIDU, also dipped by around 1.7%.
In my view, this has nothing to do with a deterioration in AI computing fundamentals. It’s a classic case of profit-taking and money rotating from high-flying stocks into lower-priced ones.
Tech stocks had been valued sky-high recently, and expectations for rate cuts have been pushed further out. High-valuation stocks are especially sensitive to interest rates, so it’s only natural for money to flow into established industrial stocks as a safe haven.
Investors are also starting to scrutinize the numbers: major tech companies have poured hundreds of billions into chips, but how much revenue are they actually generating from that investment? Concerns about ROI are showing up directly in valuation discounts.
Looking ahead, NVDA and AMD may remain volatile in the short term as the market deflates the bubble and tests support levels. But as long as the big players don’t cut their AI capital spending, the fundamentals of AI hardware remain intact. Letting some of the froth come off at these highs may actually offer people who believe in the long-term trend a safer window to assess the market.
DYOR
The action at the US market open today is pretty interesting—a real tale of two extremes. The Dow surged to 51,922 points, up 0.58%, while the Nasdaq was hammered, falling 1.31%. The S&P 500 slipped 0.47%.
Chip stocks were hit across the board: $AMD plunged 5.4%, $INTC fell 4.6%, and $NVDA followed with a 2.71% pullback. Chinese stocks listed in the US, including $BABA and $BIDU, also dipped by around 1.7%.
In my view, this has nothing to do with a deterioration in AI computing fundamentals. It’s a classic case of profit-taking and money rotating from high-flying stocks into lower-priced ones.
Tech stocks had been valued sky-high recently, and expectations for rate cuts have been pushed further out. High-valuation stocks are especially sensitive to interest rates, so it’s only natural for money to flow into established industrial stocks as a safe haven.
Investors are also starting to scrutinize the numbers: major tech companies have poured hundreds of billions into chips, but how much revenue are they actually generating from that investment? Concerns about ROI are showing up directly in valuation discounts.
Looking ahead, NVDA and AMD may remain volatile in the short term as the market deflates the bubble and tests support levels. But as long as the big players don’t cut their AI capital spending, the fundamentals of AI hardware remain intact. Letting some of the froth come off at these highs may actually offer people who believe in the long-term trend a safer window to assess the market.
DYOR