Earnings-season uncertainty has put fresh pressure on the AI trade, and the weakness is spilling into the broader market. Since mid-July, the Nasdaq 100 (QQQ) has fallen below both its 20- and 50-day moving averages. The RSI has also dropped to its lowest level since April and is now below 50—a threshold that often signals deteriorating momentum. MACD has turned negative, confirming the short-term softness.
In a correction of this nature within growth stocks, the key questions become what is driving the pullback and how far it may run.
Investors are growing more cautious about the sustainability of the AI spending boom as mixed earnings and shifting capital priorities raise questions about near-term profitability. Google’s results last week captured the tension: the company delivered strong revenue growth while continuing to invest heavily in data-center capacity to support its AI ambitions.
That caution has spilled over into the suppliers that have benefited most from the AI infrastructure buildout. Micron Technology (MU), Seagate Technology (STX), and SanDisk (SNDK) have all seen sharp selloffs in recent sessions. The declines stem from a combination of profit-taking after massive multi-hundred-percent gains over the prior year, investor fears that hyperscalers are redirecting capital expenditure toward AI compute (GPUs) rather than traditional storage and memory, and contagion from weaker-than-expected signals out of Asian memory markets, including softer forecasts from players such as SK Hynix. Additional pressure has come from concerns over rising Chinese competition, industry capacity expansions, and the potential normalization of NAND and DRAM average selling prices.
Because the Nasdaq 100 remains heavily concentrated in technology, this earnings skepticism and sector-specific weakness are weighing on the broader market. Many investors are rotating into safer areas, including value stocks, for near-term protection. We believe, however, that the durable long-term opportunity still lies in growth. As the technological landscape continues to mature and capital allocation stabilizes, investors who remain exposed to high-quality growth companies will be better placed to benefit from the eventual market recovery. However, we want to make sure the technical indicators support the move. We want to see RSI levels above 50 and an up-sloping MACD which has crossed up.
This material is for informational purposes only and is not intended as investment, tax, or legal advice. Past performance is not indicative of future results.
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