Technology stocks recovered Friday after a sharp selloff wiped trillions from U.S. market valuations, but the Nasdaq remained on course for its fourth consecutive weekly decline as investors weighed artificial intelligence spending, stronger employment data and the possibility of higher interest rates.
By yourNEWS Media Newsroom
NEW YORK — U.S. technology stocks rebounded Friday, Nov. 6, as semiconductor companies recovered from steep losses in the previous session, but the Nasdaq Composite remained headed for a fourth consecutive weekly decline amid concerns over artificial intelligence investment, potential regulatory changes and the Federal Reserve’s next interest rate decision.
The recovery followed Thursday’s broad market selloff, which sent the Nasdaq down 5.5% and erased nearly $3 trillion in market value from companies in the S&P 500. The technology-heavy index recorded its steepest one-day decline in 19 months, while the S&P 500 fell approximately 4.4% and the Dow Jones Industrial Average lost more than 1,800 points. The losses reflected a sudden retreat from technology companies that had helped drive stock indexes to repeated record highs earlier in the year.
According to Reuters’ Friday market report, the Nasdaq had recovered approximately 1.5% by early afternoon, trading near 24,682, while the S&P 500 gained about 0.7% to 7,411. The Dow remained comparatively weak, trading near 51,502 as investors continued shifting between technology companies and other sectors. Despite the day’s gains, the Nasdaq was still down approximately 3% for the week and had entered correction territory, generally defined as a decline of at least 10% from a recent peak.
Semiconductor manufacturers led Friday’s advance, with the Philadelphia Semiconductor Index rising approximately 4.4% following a decline of more than 12% Thursday. Nvidia, Advanced Micro Devices and Sandisk participated in the recovery, while shares of several other major chipmakers also moved higher. The rebound suggested that some investors were willing to purchase technology stocks after the previous session’s losses, although it did not eliminate concerns about valuations or the sustainability of spending on artificial intelligence infrastructure.
Those concerns intensified following Tuesday’s midterm elections, when Democrats secured control of both chambers of Congress and won several important state races. Investors have been evaluating whether the incoming congressional majority and state governments could impose additional restrictions on artificial intelligence development, including data center construction and energy consumption. Such changes could affect companies supplying processors, computing infrastructure and electricity to rapidly expanding AI facilities, although the extent of any future legislation remains uncertain.
The selloff also reflected broader questions about whether technology companies can generate sufficient revenue from artificial intelligence to justify the enormous investments supporting the industry. AI-related shares have experienced substantial gains over the past several years as businesses increased spending on advanced computing equipment, software and data centers. That concentration of market performance in a relatively small group of technology companies has made major indexes particularly sensitive to changes in investor expectations.
Keith Lerner, chief investment officer at Truist Advisory Services, said the longer-term outlook for artificial intelligence remained constructive despite the recent volatility.
“We still think AI is the dominant theme in this bull market,” Lerner told Reuters. “We are still giving technology the benefit of the doubt.”
Adam Turnquist, chief cross-asset strategist for LPL Financial, similarly suggested that Thursday’s reaction to the election results may have been excessive.
“AI has gone on trial several times in this cycle and come away with an innocent verdict,” Turnquist said. “This week we saw a little bit of a knee-jerk reaction.”
Friday’s rebound coincided with a stronger-than-expected U.S. employment report, which created additional uncertainty about the outlook for interest rates. Employers added 165,000 jobs in October, substantially exceeding economists’ expectations of approximately 59,000, while the unemployment rate fell to 4.1%. The figures suggested continued resilience in the labor market but also increased expectations that the Federal Reserve could raise borrowing costs at its December meeting to contain inflationary pressures.
Interest rate expectations are especially important for technology companies because higher borrowing costs can reduce the present value investors assign to anticipated future earnings. Treasury yields have already contributed to market volatility in recent months, and Friday’s employment figures reinforced concerns that monetary policy could remain restrictive. According to Reuters, traders increased their estimated probability of a December rate increase to approximately 78%, compared with about 70% earlier in the session.
Other individual stocks experienced divergent movements as investors assessed corporate earnings and forecasts. Software company Atlassian declined following its quarterly results, while Airbnb advanced after raising its full-year revenue growth outlook. Microchip Technology fell sharply after issuing a weaker-than-expected margin forecast, demonstrating that company-specific financial performance remained an important influence on share prices despite the broader technology rebound.
Energy stocks also faced pressure as oil prices moved lower and remained on course for substantial weekly losses. The S&P 500 energy sector was headed for a double-digit percentage decline for the week, adding to the broader market’s difficulties. Consumer staples and healthcare shares lagged Friday’s recovery, while information technology led gains among the benchmark index’s sectors.
By the end of Friday’s session, the Nasdaq had recovered approximately 1.1%, according to The Wall Street Journal’s market coverage, but still finished the week down about 3.4%. The Dow declined roughly 0.5% during Friday’s session and ended the week approximately 0.9% lower. All three major U.S. stock indexes posted weekly losses, underscoring the limited effect of the late-week recovery after Thursday’s steep decline.
The Nasdaq’s fourth consecutive weekly loss leaves investors confronting two competing developments: continued corporate investment in artificial intelligence and growing uncertainty over whether earnings growth can support the industry’s elevated valuations. Friday’s gains showed that demand for technology shares had not disappeared, but the broader weekly performance illustrated how quickly concerns about regulation, economic conditions and interest rates can reverse market momentum.
With the Federal Reserve’s December policy meeting approaching and the incoming Congress preparing to consider changes affecting artificial intelligence and technology infrastructure, investors will continue monitoring corporate earnings, economic data and legislative developments for indications of whether the recent volatility is temporary or part of a more sustained market adjustment.
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