Nasdaq Plunges On AI Spending Concerns
Tech Stocks Falling
The Nasdaq is on course to end the week heavily lower after a fresh plunge yesterday. Geopolitical risks, rising oil prices and rising fears of elevated capex levels among major tech names are combing to weigh on stock market sentiment this week. Last week, AI funding fears rocked martes sending the index heavily lower and that selling has continue this week with earnings undershoots from big names such as Meta and Tesla adding to tech woes. Meta missed its EPS forecasts despite a lift in revenues. However, investors were most concerned by soaring capex levels aimed at funding the group’s AI plans. Free cash flow was also seen falling into negative territory while capex forecasts for the full year were raised, signalling an expansion of the firm’s aggressive capex strategy as it looks to boost its AI infrastructure.
Hawkish Fed Expectations
These concerns over AI funding levels come at a time when the market has turned firmly hawkish on the Fed in light of the recent surge in inflation levels. September annualised CPI was seen jumping to 3.7%, up from 3.4% prior. Market pricing for a hike by year end jumped above the 90% level consequently. Against this backdrop, elevated debt levels are even more concerning and a further downturn in tech stocks looks likely unless we see any surprise upside in coming earnings. Indeed, any further signs of weakness in big names will be particularly bearish for the index near term.
Technical Views
NASDAQ
The reversal lower from YTD highs has seen price breaking below the bull trend line from YTD lows with price now testing support at the 28,860 level. This is a major support zone for the market and a break lower here will turn focus to the deeper 27,298 level next, in line with bearish momentum studies readings.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.