Wall Street Strategists: Short-Term Stagnation in Technology Stocks

Volatile Trends in Technology Stocks

In the past week, technology stocks exhibited high volatility. As investors pulled back expectations for a rate cut in December, the sale of some prominent stocks in the artificial intelligence sector caught attention. Additionally, the longest government shutdown in U.S. history has ended, and evaluations of the economy have come back to the forefront.

Wall Street Insights

According to observations, Wall Street strategists argue that the decline in artificial intelligence stocks is temporary. The sharpest drop seen in over a month is not due to a fundamental deterioration in AI or company earnings; rather, it stems from profit realization and position adjustments. For instance, notable investor Jeff Krumpelman emphasized that long-term investors shouldn't be concerned. Krumpelman noted that during the period when stocks like Nvidia (NVDA) dropped by 70% to 80% in 2022, they took large positions but later adjusted the size of those positions.

Artificial Intelligence and Future Potential

The strategist highlighted that the early stages of AI adoption remain strong, and this investment theme could last for years. However, he added that the current volatility should not be confused with the past dot-com bubble. Krumpelman stated, “We are still at the very beginning of artificial intelligence,” emphasizing that growth in this area presents significant opportunities.

Short-Term Sales and Long-Term Trends

F/M Investments CEO Alex Morris noted that the recent wave of selling in the markets operates more mechanically than based on fundamental reasons. He explained that this situation can be explained with simple mathematics. “There is significant accumulation in AI stocks, and when these stocks start to decline, the impact on the index becomes more pronounced,” he said. Morris also mentioned that adjusting positions and profit realization ahead of the upcoming quarterly results are important factors.

Company Earnings and Market Expectations

According to Venu Krishna’s report, the S&P 500 is expected to reach record profit margins by Q3 2025, showing a net increase of 14.2%. While 92% of companies report their earnings, 82% exceeded earnings per share estimates. The combined profit growth rate stands at 13.1%, marking the fourth consecutive double-digit increase. This situation demonstrates the strength of investors' confidence in artificial intelligence.

Eyes on Nvidia

Wall Street sees Nvidia's upcoming earnings report as a major catalyst. This report could reveal the real reasons behind the recent volatility and present new opportunities for investors.