Nasdaq Index: AI Hype Fades as Tech Stocks Lead Worst Week Since March

Wall Street Slumps as Tech Pullback and Economic Uncertainty Weigh on Sentiment

U.S. equities extended losses on Friday, with all three major indexes heading for their worst week in a month as concerns about lofty technology valuations and economic headwinds weighed on investor confidence.

The Nasdaq Composite dropped 1.6% in afternoon trading, bringing its weekly loss to the steepest since March. The S&P 500 and Dow also slipped, on pace for their sharpest weekly declines in four weeks.

Tech weakness led the market lower for a second straight session, as investor anxiety mounted following warnings from Wall Street executives of a possible correction. The sell-off followed a stretch of sharp gains driven by AI enthusiasm, which some now view as stretched amid doubts over revenue growth and return on investment.

Are Technology Stocks Losing Their Edge?

The information technology sector slid 1.85% Friday, pushing weekly losses to a seven-month high. Semiconductors bore the brunt, with Nvidia falling 2.8% and Broadcom losing 2.2%. The Philadelphia Semiconductor Index was also headed for its biggest weekly drop since March.

The pullback comes as traders reassess tech valuations in the absence of fresh catalysts. Tesla added to the sector’s pain, shedding 3.3% even after shareholders approved a historic pay package for CEO Elon Musk. The broader consumer discretionary sector slipped 1.04% in tandem.

What Role Is the Economy Playing in Market Sentiment?

A murky economic outlook added to the selling pressure. The longest government shutdown in U.S. history has limited access to official economic data, leaving both Federal Reserve policymakers and investors without clear signals on monetary policy. A weaker-than-expected University of Michigan Consumer Sentiment reading—50.3 versus forecasts of 53.2—reinforced fears of a slowdown.

Comments from White House economic adviser Kevin Hassett underscored concerns, citing a larger-than-anticipated economic impact from the shutdown. Traders are now weighing whether reduced consumer confidence and policy uncertainty could deepen the downturn.

Are Earnings Offering Any Relief?

While broader sentiment deteriorated, earnings continued to offer pockets of support. With 83% of S&P 500 companies having reported results, most have surpassed expectations—the highest beat rate since Q2 2021, according to LSEG.

Expedia jumped 16% after boosting full-year revenue guidance and topping Q3 profit estimates. Still, misses weighed heavily: Block dropped over 10% after falling short on earnings, while Take-Two Interactive sank 6.6% after delaying its next Grand Theft Auto installment to 2026.

What Should Traders Watch Next?

With valuation concerns pressuring tech and confidence data signaling economic fragility, short-term sentiment remains cautious. Volatility rose, with the VIX touching a two-week high, suggesting more downside risk could emerge if broader signals remain unclear.

Traders will turn their attention next week to any fresh economic data and comments from Fed officials for insight into rate policy. In the near term, equity markets appear vulnerable to further pullbacks, particularly in high-growth sectors. The short-term forecast leans bearish as sentiment cools and earnings catalysts dwindle.

More Information in our Economic Calendar.