TIMOTHY A. CLARY / AFP via Getty Images
The freakout over AI stocks abated on Friday as the US indexes inched higher.
Some investors are buying the dip in chipmakers after the worst selling day for retail since the pandemic.
Markets even brushed off the strong October jobs report, with strong gains pointing to a likely rate hike.
The bloodbath in AI stocks paused on Friday.
The tech sector was pummelled in Thursday’s session as investors took in the Democratic victory in the midterms and panicked over the possibility of a data center moratorium in key states. Investors were breathing a little easier as the week wound down, with the tech names up Friday morning as some investors bought the dip in chipmakers and other battered areas of the AI trade.
The Nasdaq 100 gained more than 1%, with the S&P 500 also inching higher. Blue chip stocks, an outlier, extended their declines, with the Dow dropping another 500 points after yesterday’s 1,800-point plunge.
Here’s where US indexes stood around 10 a.m. ET:
S&P 500 : 7,429.57, up 1%
Dow Jones Industrial Average : 51,456.95, down 0.13% (-66 points)
Nasdaq 100 : 27,230.89, up 2.26%
Here were some of the notable moves in tech:
Company Ticker Today’s move
IREN IREN +20%
Sandisk SNDK +10%
Nebius NBIS +9%
Roundhill Neocloud ETF NCLD +9%
Vertiv VRT +8%
Roundhill Memory ETF DRAM +7%
Micron MU +7%
Nvidia NVDA +6%
CoreWeave CRWV +6%
SpaceX SPCX +6%
Intel INTC +5%
iShares Semiconductor ETF SOXX +5%
Broadcom AVGO +4%
Generac GNRC +4%
Qualcomm QCOM +3%
Tesla TSLA +2%
Alphabet GOOGL +2%
Meta META +1%
The gains held even as investors digested a blockbuster October jobs report that raised the odds of a December rate hike from the Fed.
The US economy added 165,000 payrolls last month, much more than economists anticipated. While that’s good news for the economy, it points to tighter financial conditions on the horizon, which could be negative for risk assets like stocks.
Investors see about an 80% chance the Fed will raise rates another quarter-point next month, up from 73% before the jobs report, according to CME FedWatch.
Treasury yields rose after the data.
US Treasury Yield Change (in basis points)
2 year 4.53% +6
5 year 4.65% +5
10 year 4.86% +3
30 year 5.27% +2
Investors, however, are taking the positive labor data as a sign of economic strength, a welcome indicator as fears rise that a slowdown in AI development could hobble growth.
“Friday’s stronger-than-expected jobs report is a relief, and suggests that the labor market is still able to produce jobs even in this elevated interest rate environment,” Clark Bellin, the chief investment officer at Bellwether Wealth, said in a statement.
“It reinforces the distinction between a market correction and an economic downturn: an AI-led market correction does not have to translate into a broader deterioration in economic fundamentals,” Seema Shah, the chief global strategist at Principal Asset Management, said of the latest jobs data.
Sentiment is still dicey as investors recover from yesterday’s volatility. Across the ocean, the AI sell-off continued in Asia and Europe.
South Korea’s benchmark KOSPI index plunged over 8% in early trading, triggering a trading halt before ending the day 6% lower. Memory chip giants Samsung and SK Hynix bore the worst of the losses, falling 11% and 14% respectively.
Japan, Taiwan, China, France, Italy, Spain, and the UK were also caught in the sell-off.
International Index Friday performance
South Korea’s KOSPI -6%
Japan’s Nikkei 225 -6%
Taiwan Weighted Index -4%
UK’s FTSE 100 Index -2%
China’s Hang Seng Index -1%
Spain’s IBEX 35 -1%
France’s CAC 40 -1%
Italy’s FTSE MIB -1%
“When $2.5 trillion of value is lost from one of the major US stock market indices in a day, it’s understandable that investors are feeling on edge,” Dan Coatsworth, head of markets at AJ Bell, said in a morning email. He noted that in early trading only eight companies listed on the UK’s FTSE 100 were in the green.
Wall Street’s terrible Thursday
TIMOTHY A. CLARY / AFP via Getty Images
Friday’s action followed a bruising session on Wall Street on Thursday. The freakout in the AI trade marked the worst single day of selling for retail investors since the pandemic, according to data from Vanda Analytics.
The sell-off was sparked by the idea that a Democratic sweep in Congress would lead to tighter data center regulation, putting new construction on hold at a time when the focus is still predominantly on AI infrastructure. The selling intensified into the afternoon as top lawmakers called for an immediate moratorium on data centers in posts on social media.
Texas is at the epicenter of the market’s anxiety. The state is set to oversee around 25% of data center capacity in the US, and Democrat Gina Hinojosa, who won the race for governor, has been among those calling for an immediate data center moratorium.
Investors have also been growing increasingly antsy about the AI trade lately, punishing tech giants at any clue that points to a slowdown in the artificial intelligence boom. Scrutiny has particularly intensified around the hyperscalers, who continue to worry markets with capex spending even when beating on the bottom line.
Wall Street split on the latest decline. Some commentators brushed off the idea that the sell-off had created a buying opportunity, while other strategists floated the idea that the latest decline was overblown.
“The timing is uncomfortable. Investors were already lining up for a year-end rally…and now some are throwing in the towel out of frustration. Part of what we’re seeing is portfolio pain and indiscriminate selling. The candor of the flows today seems directionally rational; it’s the magnitude that’s raising eyebrows,” Ron Adler, the co-head of global high touch trading at JPMorgan, wrote in a note.
“The stock market is in the midst of a correction, and the only way a correction ends is once we find a bottom, which can take time,” Bellwether’s Bellin said.
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