Market Reversal: Nasdaq 100 Turns Negative as Tech Selloff Concerns Linger
TREE NEWS reports: US stocks staged a volatile session on Monday, with the Nasdaq 100 erasing an early 1.3% gain to turn negative by midday, while the S&P 500 trimmed its advance to just 0.2%. The Philadelphia Semiconductor Index dropped 1.3%, reflecting persistent unease over the AI trade. The pullback followed a sharp selloff in technology shares last Friday, and analysts warn that the caution has not dissipated.
Brent crude oil plunged 8%, providing temporary relief to broader markets, after Iranian President Masoud Pezeshkian indicated that the government is pursuing dialogue to resolve tensions, with the Supreme Leader granting him some authority in this regard. The move in oil came alongside a modest decline in the US dollar (down 0.1%) and a rise in long-term US Treasuries, while gold hovered near $3,900 per ounce.
Chinese Stocks Shine Amid Global Divergence
In stark contrast to the US tech weakness, Chinese ADRs rallied strongly, with the Nasdaq Golden Dragon China Index surging over 3%. XPeng jumped 8%, Xiaomi ADR gained 6.2%, Lenovo ADR rose 5.9%, Alibaba added 5.8%, Pinduoduo climbed 5.1%, and Tencent ADR advanced 3.3%. The rally was broad-based, lifting ETFs such as KWEB (+3.9%) and CQQQ (+3.3%), while FTSE China A50 futures edged up 0.45%.
The divergence highlights shifting investor sentiment: while concerns over AI spending and profitability weigh on US tech, Chinese equities are finding support from expectations of policy stimulus and improving earnings prospects.
Corporate News: Debt Issuance and M&A
Several major tech companies made headlines. Meta slipped 0.75% after reportedly planning its first major debt sale in six months, aiming to raise at least $20 billion. Alphabet rose 1.1% on news of a euro bond issuance, following its $10 billion raise in May. Oracle fell 6.4% after launching a $20 billion equity and debt financing. In the optical communications space, Marvell Technology dropped 10% after announcing a $115 billion acquisition of Lumentum, which itself fell 6.27%. Corning gained 0.81%, Coherent rose 1.75%, and Applied Optoelectronics added 2.06%.
Anthropic released an amended S-1 filing ahead of its IPO, disclosing third-quarter revenue of $16.96 billion, up from $1.38 billion a year earlier, but a net loss of $23.29 billion (including $21.9 billion in non-cash charges).
Analyst Perspectives: Caution vs. Optimism
Simon Wiersma, Chief Investment Strategist at ING, commented: “The rebound is modest relative to Friday’s selloff, and I wouldn’t interpret it as a convincing ‘buy the dip’ signal yet. Uncertainty around AI investments, interest rates, and geopolitics remains ample enough to keep investors cautious.”
Morgan Stanley’s Mike Wilson warned of potential “clearing events” that could trigger another leg down, possibly pulling the S&P 500 down about 9% from its recent high to 7,100, before eventually reaching 8,000. Barclays strategists, including Ajay Rajadhyaksha, took a more sanguine view, arguing that the recent weakness is “not the beginning of the end” for the AI trade but rather a regular correction similar to two earlier episodes in 2026.
European markets were mixed, with the Stoxx 600 slipping as energy stocks weighed. Alstom plunged 25% after cutting its full-year guidance and announcing a restructuring. In Asia, Japan’s Kioxia Holdings fell sharply on a cautious outlook, underscoring lingering doubts about AI investment returns.
Key Takeaways for Investors
- Tech volatility persists: The Nasdaq’s reversal signals that last week’s selloff has not been fully digested. Investors should brace for further swings, especially as AI spending concerns mount.
- Chinese equities outperform: The strong rally in Chinese ADRs suggests a rotation into undervalued markets, potentially driven by policy support and earnings recovery.
- Oil plunge offers relief but risks remain: The 8% drop in Brent crude, triggered by geopolitical de-escalation, could ease inflation pressures, but the situation remains fluid.
- Debt issuance surge: Meta, Alphabet, and Oracle are tapping debt markets aggressively, reflecting the capital-intensive nature of AI infrastructure. Watch for potential strain on credit markets.
- Upcoming catalysts: US midterm elections and a slew of jobs data this week will likely dictate near-term direction. Caution is warranted.
