U.S. tech stocks rebounded sharply on Friday, a day after the sector’s worst plunge in over a year. The tech-heavy Nasdaq Composite gained 1.1%, paring some of the 5.5% loss from Thursday, while Nvidia (NASDAQ: NVDA) recovered 2.8% following a 9.3% rout. The moves reflect a market grappling with fears over AI investment, as reported by GP.
The selloff on Thursday, the worst for U.S. markets since April 2025, was driven by concerns over setbacks for the AI sector following the Democratic party’s gains in the midweek midterm election. A broad-based decline followed initial fears about AI and data center investments. But on Friday, the market staged a technical rebound. “We see a small recovery, and it’s quite necessary. Had we not seen it, I think one would have had reason to be more concerned,” said Björsell to GP.
How the Selloff Spilled Over to Europe
The turbulence was not contained to Wall Street. Asian markets fell sharply before Europe opened, with Tokyo’s Nikkei 225 down 6%. This set the stage for a difficult session on European bourses. Stockholmsbörsen inledde fredagen med kraftiga nedgångar, med det breda OMXSPI-indexet fallit med 1,5 procent och storbolagsindexet OMXS30 backade 1,6 procent, rapporterar Dagens industri. The declines were a direct spillover from the AI-driven panic in the United States and Asia.
“What is a bit scary is that everything somehow comes back to AI expansion, one way or another,” said Jon Arnell, investment chief at von Euler & Partners, to Dagens Industri, which was cited by Aftonbladet. The sentiment was mirrored by Hao Hong, investment chief at hedge fund Lotus Asset Management, who warned that the correction was far from over. “There is nowhere to hide,” he told the Financial Times. “I believe this correction is far from over.”
A Rally Fueled by Oversold Conditions
The Friday rebound was, in part, a technical bounce after the severe selloff. Advanced Micro Devices (NASDAQ: AMD) saw an 11% jump on Friday, rebounding from a 17.3% plunge the day before. Björsell characterized Thursday’s move as an “accelerating” and “panicky” sell-off, suggesting that such sharp declines often provoke a countertrend reaction. “The movement yesterday felt like it was accelerating, and in that way, it became a bit more of a panic move. Therefore, one had hoped that it would get a small counter-effect today,” he explained to GP.
While the tech sector found its footing, other major indices showed a mixed performance. The Dow Jones Industrial Average closed down 0.5% for the day, while the broader S&P 500 managed a slight 0.3% gain. This divergence shows that while the AI panic was central to the week’s volatility, not all market participants were convinced of a broad-based recovery. 28 av de 30 storbolagen på Stockholmsbörsen backade, även om nedgångarna var måttliga.
Market Rebounds After Tech Sector Selloff
- The market’s 1.1% rebound in the Nasdaq was a technical correction following a 5.5% selloff driven by fears of AI policy headwinds.
- The volatility is global, with European and Asian markets showing significant contagion from the U.S. tech sector’s turmoil.
- Strong U.S. jobs data for October has increased the probability of a December interest rate hike, adding another layer of complexity to the market’s outlook.
The Macroeconomic Crosscurrents
The market’s focus on AI is undeniable, but it is not the only force at play. “We talk a lot about AI, but we have other things that the market must also keep an eye on, for example, the situation in the Middle East and inflation,” Björsell told GP. These broader geopolitical and economic factors are creating a complex environment for investors.
The release of unexpectedly strong October jobs data on Friday further complicated the picture. The strong figures increased the already high probability of a further increase in the U.S. federal funds rate in December.
What Happens Next Week
Market participants should brace for continued turbulence. “I believe that one should be prepared that the market will be even more nervous next week, and I think the main focus should be on AI and how one should view future investments,” Björsell stated. His view is that the market’s nervousness will center on the trajectory of AI spending and investment, which remains uncertain in the wake of the political shift.
However, not all stocks were caught in the downdraft. On the Stockholm exchange, some names bucked the trend. NIBE and H&M closed near the bottom, down about 2%, while Skanska and Epiroc moved higher. The standout performer was the consultancy BTS, which jumped 16% after a strong quarterly report, demonstrating that individual company fundamentals can still overcome broader market sentiment, Omni reported. This divergence highlights that while the macro and sector-wide winds are strong, specific corporate catalysts remain potent drivers of stock performance.
