Concerns over an AI bubble burst, economic slowdown expectations, and profit-taking pressures collided this week, triggering the most intense intraday swings in US stocks for months.
The S&P 500 fell nearly 2% this week, bringing its November decline to 3.5% despite a Friday rebound. The tech-heavy Nasdaq Composite has slumped over 6% this month, marking its worst three-week drop since April.
Momentum stocks bore the brunt of the selloff. Robinhood lost about a quarter of its market value this month, while Coinbase plunged 30% and Palantir dropped roughly 23%. Goldman Sachs' high-beta momentum basket tumbled nearly 15% from recent highs—its worst weekly performance since November 2022.
Investors heavily exposed to AI companies faced acute anxiety. The Global X Artificial Intelligence & Technology ETF slid about 10% this month, while an ETF tracking the "Magnificent Seven" tech giants fell 6.6% since late October.
**NVIDIA’s Earnings Spark Unexpected Rout** After Wednesday's close, most Wall Street participants expected NVIDIA’s strong earnings to lift markets—an initial rally that abruptly reversed. Though NVIDIA’s results and guidance appeared positive across metrics, the stock opened 5% higher at $196 Thursday before plunging to close down 3% at $180.98, a 7% intraday drop to its lowest close since October 22. The reversal dragged the S&P 500 down roughly 3%.
“People were genuinely spooked,” said Ramon Verastegui, founder of Kairos Investment Advisors, who traded options until midnight amid the chaos. Analysts noted parallels between CEO Jensen Huang’s attempts to dismiss AI bubble concerns and Cisco Systems’ John Chambers during the dot-com era—a year after Chambers’ bullish 2000 remarks, Cisco shares collapsed 67%.
**From Private Credit to Crypto** Once overlooked by equity investors, private credit markets now command attention. OpenAI’s turmoil and First Brands’ sudden collapse have heightened worries over loose lending conditions. “Some firms borrowed seven times cash flow at 2-3% rates but now face 8-10% refinancing costs,” noted Fourier CIO Orlando Gemes.
Cryptocurrencies added pressure, with Bitcoin briefly sliding to $80,553 Friday—still down over 30% from October’s $126,000 peak. Unlike past cycles, crypto’s growing market size raises concerns about broader spillover effects. Traders cited Bitcoin prices as a key sentiment gauge all week, with Bill Ackman acknowledging underestimated links between crypto liquidations and stocks like Fannie Mae.
**Leverage and Year-End Unwind Amplify Swings** Traders attributed volatility to extreme leverage and profit-taking. FINRA data shows margin debt hit a record $1.1 trillion in October, while Morningstar reports leveraged equity fund assets surged to $140 billion+ this fall—a 1990s-era high.
“Overleveraged players long both crypto and bubbly tech stocks are liquidating tech positions to cover crypto margin calls,” said Benn Eifert of QVR Advisors. Human psychology also played a role: with the S&P up 12% YTD and bonds having their best year since 2020, hedge funds rushed to lock in gains amid seasonal weakness.
Still, some see relative calm. Cantor Fitzgerald’s Matthew Tym noted clients aren’t panicking, with diversified investors faring well. “The S&P is just 4.2% off record highs—most are waiting it out.”
