S&P 500, Nasdaq 100 jump more than 1% as tech-stock rout eases

The Nasdaq 100 Index advanced 1.7% at 12:27 p.m. in New York, with the benchmark looking to rally from its biggest three-session skid since April.

• US stocks rebounded as dip buyers capitalized on AI-driven tech selloff
• Nasdaq 100 rose 1.7%, S&P 500 up 1.6% after three-session slide
• Amazon shares fell 7% on $200B AI spending plans, while AI chipmakers rallied

Did our AI summary help?

US stocks started to rebound on Friday as dip buyers capitalized on the artificial intelligence-fueled plunge in technology stocks.

The Nasdaq 100 Index advanced 1.7% at 12:27 p.m. in New York, with the benchmark looking to rally from its biggest three-session skid since April. The tech-heavy gauge is on track for its worst week since November. Meanwhile, the S&P 500 Index advanced 1.6%, while the Cboe Volatility Index hovered at around 20.

“A market that once viewed AI as a rising tide lifting all boats has quickly become more skeptical, punishing companies seen as overspending and demanding clearer paths to return on investment,” said Mark Hackett, chief market strategist at Nationwide. It’s “a shift that’s showing up in the once-dominant Magnificent Seven following earnings from Nvidia, Amazon, and Microsoft,” he added.

It was a rocky start to the week for both the S&P 500 and Nasdaq 100. A new AI automation tool from Anthropic sparked a $285 billion rout in stocks across software, financial services and asset management sectors on Tuesday, kicking off a three-session slide as investors expressed concern over disruption from the technology.

Eye-watering spending plans on AI from Big Tech names, including Alphabet Inc. and Amazon.com Inc. only fueled those worries. Four of the biggest technology companies together have forecast capital expenditures that will reach about $650 billion in 2026, which is earmarked for new data centers and the equipment needed to run them.

While “emotional deleveraging selloffs” like the one seen this week are unnerving, Hackett noted that they are “normal and healthy calibration events.”

“At this point, the macro and earnings environment remain encouraging, suggesting this is more a positioning shift and technical pause rather than a fundamental crack,” he said.

“If it’s not geopolitical shocks roiling markets it is artificial intelligence, either because AI is a bubble, or because it is decidedly not but it will instead wreak havoc across business models and the labor market,” said Daniel Morris, chief market strategist at BNP Paribas Asset Management. “The news over the last week has highlighted different aspects of AI’s disruptive power.”

Morris points out that the recent events reinforce the importance of diversification when it comes to tech sector exposure across industries, as well as developed and emerging regions.

“While always valuable for a portfolio, it is all the more critical given the rapid developments in the tech industry,” said Morris. “Almost any player can be disrupted, but the likelihood is that the disruptor will be somewhere else within the index.”

Earnings Roll On

Amazon shares plunged 7.0% on Friday, with the company announcing plans to spend $200 billion this year on data centers, chips and other equipment. The commitment worried investors that the bet on AI may not pay off in the long run.

“This level of capex is expected to put pressure on free cashflow, though one can argue that Amazon has a great track record of managing through deep cycles in the past and coming out as a winner on the other side,” said Mamta Valechha, consumer discretionary analyst at Quilter Cheviot.

In response to Amazon’s spending pledge, makers of gear used in AI computing rallied. Nvidia Corp., Advanced Micro Devices Inc. and Broadcom Inc. all rose.

Meanwhile, Bill Holdings Inc. jumped 20% after the application software company boosted its full-year forecast. Roblox Corp. surged 12% after fourth-quarter results beat expectations on key metrics.

“Our message to investors is to remain opportunistic when stocks dip, but not necessarily during every dip,” Bellwether Wealth’s Clark Bellin said. This year “should still be a positive year, with plenty of opportunities to buy stocks on sale.”