Nasdaq Index Analysis: Can Chips Extend Gains as Software Lags?

Nasdaq Extends Rally as Chips Lead and Software Gets Left Behind

The Nasdaq Composite gained 187.42 points, or 0.83%, to close at 22,822.42 on Thursday. Two straight days of buying with Middle East tensions easing and volatility coming down. Growth stocks are finding their footing again and the index’s recent rebound is staying intact.

The pullback in oil prices took some inflation pressure off and steadied the macro picture. That gave buyers a reason to step in. The problem is the economic data is still showing slower growth alongside elevated inflation and the Federal Reserve isn’t done. Policymakers left the door open to more rate hikes if needed and that’s sitting in the background even as stocks push higher.

Technically, the main trend is up after the Nasdaq Composite (IXIC) jumped the 200-day moving average at 22396.17 and the 50-day moving average at 22520.45. Additionally, buyers drove the index to the bullish side of a long-term 50% to 61.8% retracement zone at 21881.82 to 22532.88. All four levels are new support.

The daily chart shows the market has a clear shot at a pair of main tops at 23169.68 to 23320.62. The latter could serve as a launching pad for a drive into major tops at 23988.27 and 24019.99.

Chips Run, Software Gets Sold

The rotation under the surface was clear. Chip stocks led the Nasdaq higher and retail showed strength during the session. Software got hit hard, falling 2.2% as investors moved away from names facing AI competition pressure and valuation concerns. When chips are running and software is selling off on the same day, the market is making a statement about where it sees value right now.

Amazon jumped 5.43% after highlighting strong artificial intelligence growth in its cloud business, with its cloud unit generating more than $15 billion in annualized AI revenue. Intel added 4.70%, reinforcing semiconductor leadership across the group. Meta Platforms gained 2.63% as large-cap tech participated in the advance.

Applied Digital dropped 8.0% after reporting a wider quarterly loss. Cloudflare fell 13.88%, Fastly declined 12.76%, ServiceNow lost 7.86% and Zscaler dropped 11.46%. That’s a significant selloff concentrated in one part of the market and it’s worth watching whether the pressure spreads into the broader software space.

What’s Next

Advancers outpaced decliners on the Nasdaq which tells you participation was broad even with the software weakness. The chips and large-cap tech names are carrying this index right now. Middle East developments and incoming economic data are the two things that will determine whether this rally extends or stalls. The market is moving higher but it’s being selective about what it’s buying and that selectivity is worth paying attention to.

More Information in our Economic Calendar.