AI Still Under Pressure, But Year-End Rally Possible

The Nasdaq Composite experienced a downturn of 0.84% on Monday, pressured by declines in major technology stocks. Apple , Meta, and Oracle each retreated by over 1%. Investors are increasingly scrutinizing the tech sector amid concerns over valuation froth and potential capital expenditure overruns, particularly as interest rates remain a key consideration.

Nvidia, a pivotal player in the artificial intelligence landscape, underperformed its peers, shedding nearly 2%. Despite CEO Jensen Huang’s bold assertion in October that the chipmaker held “half a trillion dollars” in secured business for 2025 and 2026, investors are approaching the upcoming Q3 earnings call with a degree of caution. Analysts will be meticulously dissecting Huang’s commentary for confirmation of sustained robust growth into 2026, as implied by the substantial order book.

The challenge for Nvidia lies in managing expectations. As one of the two pivotal companies – alongside OpenAI – at the heart of the burgeoning AI ecosystem, any perceived shortfall in performance or guidance carries a magnified risk of triggering a significant market correction. The market’s sensitivity to Nvidia’s performance underscores the broader anxieties surrounding the sustainability of the AI-driven tech rally.

“If they offer any even slightly muted guidance or forecast for demand for their chips, the market would take that poorly,” noted Baird investment strategist Ross Mayfield, highlighting the precarious position Nvidia occupies.

Despite the recent tech sell-off driven by valuation and capital expenditure concerns, several analysts maintain a cautiously optimistic outlook, suggesting the potential for a year-end rally. The argument rests on the expectation that anticipated interest rate adjustments and positive macroeconomic data could provide a late-year boost to investor sentiment.

“We continue to see a balance of bullish and bearish signals heading into year-end, but our stance remains that a year-end rally is likely,” wrote Michael Graham, analyst at Canaccord Genuity, in a Monday research note. Graham’s perspective suggests that underlying economic fundamentals and seasonal factors could outweigh current market anxieties.

Similarly, HSBC’s chief multi-asset strategist Max Kettner expressed the bank’s view that “the probability of a melt-up into year-end – particularly in equities – is much greater” than the likelihood of an AI bubble bursting. Kettner’s assessment reflects a belief that positive earnings momentum and continued investor appetite for risk assets could fuel further market gains in the near term, despite lingering concerns about AI valuations.

If these bullish predictions materialize, investors could be poised for a rewarding end to the year, allowing for a more focused assessment of the AI landscape in the coming new year.

Major U.S. indexes fall Monday stateside. Technology stocks faced selling pressure, continuing a recent downtrend. Alphabet shares, however, defied the broader market weakness following news of Berkshire Hathaway’s investment. The pan-European Stoxx 600 index also posted a loss of 0.54%.

‘Half a trillion dollars’ of business for Nvidia. CEO Jensen Huang’s statement about $500 billion in orders for 2025 and 2026 is fueling analyst speculation of a strong sales outlook for 2026. Investors are eager to scrutinize the company’s upcoming earnings report for concrete evidence supporting this projection.

Divided outlook on a December rate cut. Federal Reserve officials are presenting contrasting views on the timing of future interest rate adjustments. Fed Governor Christopher Waller emphasized his focus on the weakening labor market, while Vice Chair Philip Jefferson stressed the need for a cautious approach to monetary policy decisions. This divergence highlights the ongoing debate within the Fed regarding the appropriate course of action in response to evolving economic data.

India announces energy deal with the U.S. A significant portion of India’s liquified petroleum gas imports will now originate from the United States, underscoring a strategic effort to strengthen bilateral ties amid ongoing trade discussions.

[PRO] Bitcoin’s downward trend could portend trouble. The recent price weakness in Bitcoin is raising concerns among some analysts, who view it as a potential “leading indicator” for broader U.S. stock market performance. Others maintain that Bitcoin retains underlying positive catalysts that could support a recovery in the near term.