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On Friday, the Nasdaq had its worst session in a year. By Monday it all seemed like a bad dream.<\/p>\n
The chipmakers that had their worst session since 2020 on Friday (Micron, Broadcom) were Monday\u2019s best performers, up 6.5% by midday. Wall Street appears to consider Friday as a welcome easing off of a record-setting rally, as opposed to a genuine repricing of the AI trade that other analysts warned of.<\/p>\n
New York\u2019s bad dream was, overnight, Asia\u2019s waking one. South Korea\u2019s KOSPI\u2014the best-performing major index in the world this year\u2014plunged as much as 8.8% at the open Monday, triggering a 20-minute trading halt, its third of 2026, and closed down 8.29%.\u00a0<\/p>\n
Samsung Electronics and SK Hynix\u2014the two memory-chip makers that together make up roughly half of the index\u2014fell about 10% and 8%, respectively; the won opened at a 17-year low against the dollar. Japan\u2019s Nikkei lost 3.9%, China\u2019s CSI 300 2.1%.<\/p>\n
Nvidia\u2019s Jensen Huang also called Friday\u2019s selloff a buying opportunity, telling investors demand for AI chips keeps outrunning supply. It echoed the case he made at Nvidia\u2019s GTC conference in March, when he projected $1 trillion in combined sales for the company\u2019s Blackwell and next-generation Vera Rubin chips through 2027\u2014double an earlier forecast\u2014and called demand \u201coff the charts.\u201d It appears like the markets listened to him.<\/p>\n
Morgan Stanley\u2019s chief equity strategist Mike Wilson called Friday a \u201chealthy reset,\u201d noting markets \u201crarely move in a straight line\u201d at the pace seen since the March lows, and reaffirmed an 8,000 target for the S&P 500, now trading around 7,460. Chris Larkin, an analyst from Morgan Stanley made the same point from the other side: after nine straight weeks, he wrote the market \u201cwas arguably due for at least a reset.\u201d<\/p>\n
\u201cLast week didn\u2019t derail the rally, but it may have made it more sensitive to negative surprises in the near term,\u201d Larkin wrote in a note.<\/p>\n
The negative surprise was positive news for the economy: a stellar May jobs report. Employers added 172,000 workers, roughly double what forecasters expected, and the strength was enough to push traders to fully price a quarter-point Fed rate hike this year, according to Oxford Economics.<\/p>\n
That\u2019s because a labor market that hot gives the Federal Reserve no reason to cut and some reason to hold or hike\u2014and higher rates fall heaviest on the high-growth AI names that had led the rally. The May report was the first jobs data of Kevin Warsh\u2019s tenure as Fed chair, and it makes it harder for him to appease President Donald Trump with a rate cut. Trump said an interview that aired Sunday on Meet the Press that the report was \u201cgreat\u201d and insisted \u201cthere\u2019s no reason to raise interest rates,\u201d which he said would \u201ckill success.\u201d<\/p>\n
Warsh, he added, should \u201cdo whatever he wants.\u201d<\/p>\n
The reason Trump and many on Wall Street fear a rate hike is that it could uniquely hurt the AI trade. A stock that earns most of its money years out is worth less when the interest rate used to value those future earnings goes up, which is why the Nasdaq fell 4% on Friday while the Dow, with less riding on tech, lost 1.4%. The two-year Treasury yield, the most rate-sensitive point on the curve, rose on Friday to its highest since February 2025, while the 10-year pushed above 4.5%.<\/p>\n
Treasury yields barely moved Monday, which shows markets are looking more towards inflation, Larkin says: data that will come out this week as the May CPI comes in on Wednesday and PPI Thursday. The Fed is already in its pre-meeting blackout, so there are no officials to talk the numbers up or down. If inflation runs hot, the surprise Larkin described might arrive on schedule.<\/p>\n
The other variable is the war in Iran. Even as fighting intensified over the weekend\u2014Iran struck Israel overnight in retaliation for Israeli attacks on Lebanon, and Israel struck back\u2014by Monday morning in New York both sides had pledged to de-escalate. The markets could be pricing in an end to the war in Iran, though crude jumped more than 4% on the strikes before trimming the move to about 1.5%\u2014hardly a market pricing in peace. If there\u2019s another flare-up, it could also disrupt the AI rally.<\/p>\n
The demand story faces an especially critical test Friday, when SpaceX is set to price what would be the largest IPO in history at a $1.75 trillion valuation. Much of the case rests on AI: The company has lined up roughly $75 billion in future contracted compute revenue, including a $30 billion deal under which Google will pay $920 million a month to rent about 110,000 Nvidia chips from the data centers SpaceX picked up in its xAI merger.<\/p>\n
Not everyone takes the number at face value: Morningstar said it values the company at less than half its target. The question under the chip rebound and the question under the IPO are the same one: whether AI demand justifies the price. But Friday will give one real answer.<\/p>\n<\/div>\n
#trades #worst #day #year #buying #opportunity #Monday<\/p>\n","protected":false},"excerpt":{"rendered":"
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