Technology stocks led the Nasdaq lower on Monday, with the index slipping 0.6% as concerns about the market's heavy reliance on artificial intelligence-related shares weighed on sentiment. The decline was broad-based, as declining issues outpaced advancers by a 1.51-to-1 margin, underscoring the fragility of the recent rally in AI-linked equities.
At 09:45 EDT, the Nasdaq Composite was down 0.63%, while the Dow Jones Industrial Average gained 0.21%, reflecting a rotation away from tech names. The S&P 500 also fell 0.27%, with growth headwinds persisting across the broader market. The divergence between the Nasdaq and the Dow highlights a potential revaluation of AI-related assets rather than a broad market downturn.
The weakness was particularly pronounced in the semiconductor sector, with Sandisk Corporation (NASDAQ:SNDK) plunging 10.62% amid downgrades in storage and memory segments. Micron Technology, Inc. (NASDAQ:MU) and Marvell Technology, Inc. (NASDAQ:MRVL) both declined more than 6%, as concerns over memory-cycle dynamics and custom-chip valuations weighed on investor confidence.
Nvidia Corporation (NASDAQ:NVDA) slipped 2.44% ahead of its highly anticipated earnings report on Wednesday. The company's results are seen as a key test for AI-related investment outlooks in chips, servers, and cloud infrastructure. Investors have been trimming positions ahead of the announcement, with Cboe strategist JJ Kinahan noting that technology was at the forefront of initial declines, with Alibaba and Samsung also dragging on sentiment from Asian markets.
Despite the recent pullback, Wall Street sentiment toward Nvidia remains positive. On Monday, three firms reaffirmed upbeat ratings and set price targets well above the stock's Friday close of $214.72. Cantor Fitzgerald's C.J. Muse set an Overweight rating with a $350 target, KeyBanc's John Vinh also rated Overweight with a $330 target, and Rosenblatt's Kevin Cassidy reiterated a Buy with a $325 target.
"Chips have become a frothy space," said Marta Norton, Empower's chief investment strategist. Norton cautioned that even solid fundamentals do not guarantee a stock is appealing at any valuation, a sentiment that seems to be resonating with investors as they reassess the sector's lofty multiples.
Macro pressures are also weighing on tech valuations. The 30-year Treasury yield remained above 5%, while the 10-year yield dipped to 4.70%. Elevated long-term rates reduce the present value of future technology sector profits, adding further headwinds to growth stocks. Key catalysts this week include Nvidia's Q2 earnings on Wednesday, the U.S. PCE inflation report also due Wednesday, and Federal Reserve Chair Jerome Powell's Jackson Hole address on Friday.
The investor signal is clear: if Nvidia surpasses the high expectations, the breadth weakness seen on Monday could quickly reverse. However, an earnings report that merely meets forecasts might leave the pricey chip sector vulnerable to further selloffs. Apple Inc. (NASDAQ:AAPL) and Amazon.com, Inc. (NASDAQ:AMZN) both advanced by under 1%, providing some support to the Nasdaq, but failed to improve breadth among semiconductor stocks.
Intraday movements may shift before the close, and any unexpected developments in Iran sanctions, Treasury policy, or earnings results could rapidly disrupt the ongoing rotation. Market participants are bracing for a volatile week ahead as they navigate the intersection of AI exuberance and macroeconomic uncertainty.
