Tech shares stumbled midweek as enthusiasm for artificial intelligence eased and investors recalibrated positions after a strong summer run. According to CNN, the tech-heavy Nasdaq Composite fell 0.67% on Wednesday after sliding 1.46% on Tuesday, putting the index on track to break a two-week winning streak. The S&P 500 dipped 0.24% for a fourth straight loss, while the Dow hovered near flat.
AI jitters and rotation hit high-momentum names
AI-linked leaders were among the laggards. Palantir fell 1.1% Wednesday after a 9.35% drop Tuesday, while Nvidia edged down 0.14% after a 3.5% slide the prior session. Ulrike Hoffmann-Buchardi, head of global equities at UBS, said investors rotated out of high-momentum tech stocks, reflecting renewed jitters over the sustainability of the AI trade. Advanced Micro Devices and Marvell Technology were each down almost 7% this week.
Sentiment cooled after OpenAI chief executive Sam Altman said he thinks the market might be in a bubble. “Are we in a phase where investors as a whole are overexcited about AI? My opinion is yes,” Altman told reporters last week, according to The Verge, while adding he believes AI will still provide economic value.
Eyes on Jackson Hole as markets reassess
Investors are awaiting Federal Reserve Chair Jerome Powell’s remarks Friday at the Jackson Hole Economic Symposium, which could signal the central bank’s potential rate-cutting path. “It’s just a pause that may refresh as investors retrench and rethink how they want to position their tech dollars,” said Rob Haworth of US Bank Asset Management Group. Wedbush’s Dan Ives noted Altman’s comments “spooked some people,” adding that profit-taking into Labor Day may be “short lived.”
Big Tech cools as defensives outperform
Each of the Magnificent Seven — Apple, Alphabet, Amazon, Meta, Microsoft, Nvidia and Tesla — declined on both Tuesday and Wednesday, weighing on broader indexes. As of Tuesday, those seven made up 33.5% of the S&P 500’s market value, underscoring their outsized influence.
While mega-cap tech sagged, about 70% of S&P 500 stocks closed higher on Tuesday, Hoffmann-Buchardi said, with consumer staples, utilities and real estate outperforming. “Stocks have been on an absolute tear. Valuations have sprinted up,” said Baird’s Ross Mayfield, who expects “pockets of profit taking.”
Infrastructure Capital Advisors’ Jay Hatfield said he reduced tech exposure in recent months and described this period as the start of a historically weak season for stocks, while remaining bullish into year-end. Palantir shares, still up 106% this year, have fallen six straight sessions and briefly dropped as much as 9.8% Wednesday before paring losses. “Palantir is like the poster child for excessive valuation,” Hatfield said.
