On Friday, trading in the technology sector paused amid a rebound after earlier sharp selloffs: the Dow Jones rose by 1,207 points, or 2.47%, and first crossed the 50,000-point mark. Nasdaq added 2.18%, and the S&P 500 rose 1.97%.
The Dow and the S&P posted their best day since May, while Nasdaq was best since November.
This rebound came after the Nasdaq logged the worst three-day losses since April at the end of the week. For the week, the market value of the technology sector fell by more than $1.5 trillion, but on Friday investor sentiment partially recovered.
In recent days, volatility around the technology sector and software overall has dominated on Wall Street. Here’s why:
The fear that AI tools could disrupt business models is weighing on software stocks.
Investors are growing skeptical about Big Tech’s massive spending on building data centers to support the AI boom.
Tech stocks had been expensive due to substantial gains in recent years, making them vulnerable to selloffs on a “sell now, ask questions later” basis.
The wave of AI investment temporarily increased the available level of profits for many companies; now Wall Street must be more selective in determining winners and losers.
“Recent months have shown a shift from the mentality of ‘every tech stock is a winner’ to a harsher landscape of winners and losers,”
Against this backdrop, attention is also turning to risky assets: Bitcoin, which touched its low since October 2024, could push investors toward safer assets at the start of the week. On Friday the cryptocurrency rebounded about 10% and traded around $70,000.
“Stocks started February with high volatility,” said Clark Bellin, president and chief investment officer at Bellwether Wealth, in a note.
“Markets are not characterized by an overly bullish sentiment, but they are not dead: investors are still focused on daily profits and their growth.”
“The bar for Big Tech remains exceptionally high,” said Sianna Smith, Senior Investment Strategist at Global X ETFs, during an interview with CNN.
“Markets reward investments in AI only when they are paired with clear, stable revenue growth.”
The topic of artificial intelligence remains a central theme for stock markets over the past three years. Some investors are reducing their willingness to pay high prices and are seeking more grounded opportunities to enter the industry.
Nvidia stock rose 7.78% after it posted the best day since April on Wednesday. On Monday investors remained positive about chip suppliers, while Big Tech continued to expand data-center plans.
“When you push a beach ball underwater in sectors like Big Tech, the rebound can be impressive,” said Chris Gallipok, senior market strategist at Franklin Templeton, CNN.
Matt Egan of CNN contributed to this report.
Against all this, Nvidia continues to show strong results and supports optimistic expectations for the impact of AI on the real economy.
