US tech and AI-related stocks sit about 10% below their recent peak after a plunge over the past few weeks. Four gauges, covering tech positioning, stock correlation, options demand and technical charts, give mixed signals on whether the selloff is over.
Investors are sifting through data to judge whether the US selloff has ended, and early indicators say it is too soon to sound the all-clear. After the Nasdaq-100 hit a record high in early October, a plunge over the past few weeks left tech and AI-related stocks about 10% below their recent peak, though they have shown recent signs of stabilization.
Two of the four gauges look encouraging, one offers a mixed picture, and the technical read says it is too soon to relax, analysts say.
What drove the slide
The AI rally stumbled in early October on worries about AI infrastructure spending and the expected returns. Investors then dumped shares and bonds of CoreWeave after hyperscalers' third-quarter reports hinted at project delays and slower capital spending growth.
The latest catalyst was the US midterm elections. Democrats' strong showing revived slowdown worries and hit AI stocks hard, but shares have steadied somewhat in recent sessions.
Positioning and correlation offer support
Deutsche Bank data show that last week's selloff pushed tech positioning below its April 2025 "Liberation Day" lows. Strategist Parag Thatte said the bank sees the selloff as driven by a forced positioning unwind, and noted that Tech has previously bounced from similar levels.
Expectations for stock correlation also rose only modestly. Rocky Fishman of Asym Research said that the lack of a larger jump suggests investors see a sector-specific selloff rather than a substantial economic downturn.
Options and charts urge caution
The options signal is mixed. Carrick Lane's John Marshall said that retail call buying in AI stocks fell sharply last week, leaving the one-month normalized put-call skew near the middle of its 13-year range. In his words, the AI trade no longer looks crowded in the short term, but the signal is not washed out enough to buy equities on positioning alone.
Technical strategists remain cautious. Fundstrat's Mark Newton said the rebound in the Invesco QQQ ETF has stalled just below its downtrend from late October, and that US stocks are likely to stay volatile for a couple more weeks. According to Newton: "It’s still too early to have confidence that last week’s decline has run its course"
Source: Reuters via Investing.com
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