Why The Nasdaq Just Hit Correction Territory

Why The Nasdaq Just Hit Correction Territory – Prof G Markets

Market views

Bullish

AAPL— Apple has been the best performer of the year among Magnificent Seven stocks, notably sitting out the AI race while others face concerns about AI ROI and widening credit spreads.
VALUE— Value investing is recommended as a diversification away from AI exposure, with value factors outperforming growth as investors shift toward companies with earnings and debt servicing capabilities in a higher-for-longer rate environment.
PE— Private equity focused on value investing is recommended as a way to diversify away from AI exposure in the private markets.
PRIVATECREDIT— Private credit is recommended as a non-AI investment to diversify portfolios heavily exposed to AI across equities, public credit, and venture capital.

Bearish

HYPERSCALERS— Hyperscalers (large tech companies building AI infrastructure) are shifting financing from equity to debt, causing massive supply of investment grade credit, widening spreads, and raising questions about AI ROI payoff timelines and sustainability of the buildout.
ORCL— Oracle's credit default swap prices have hit record highs recently, reflecting market concerns about AI infrastructure financing and ROI despite strong fundamentals.
GOOGL— Google reported negative free cash flow for the first time in its history due to AI infrastructure investments, raising questions about excessive investment and payoff timelines. Credit spreads and CDS spreads are widening.
AMZN— Amazon's recent debt issuance resulted in concessions and wider trading spreads, signaling market concerns about hyperscaler financing costs. CDS spreads have also hit recent highs.
NVDA— Nvidia's credit default swap prices have hit record highs recently despite being a primary AI infrastructure beneficiary, reflecting broader market concerns about AI buildout sustainability and circular revenue dynamics.
SPACEX— SpaceX shares fell to new lows at $107, down 52% from all-time highs, and credit default swap prices hit record highs, reflecting concerns about the company's debt and financing situation.
SEMICONDUCTORS— Semiconductor stocks entered correction territory with the PHLX semiconductor index falling 6% and major names like Micron down 9%, SK Hynix down 15%. Nine of the 12 biggest S&P 500 contributors in H1 were semiconductor stocks, raising concerns about market direction without chip stock support.
MU— Micron fell 9% as part of the broader semiconductor selloff, reflecting concerns about AI infrastructure demand and chip stock valuations.
GROWTH— Growth investing is underperforming as factor models show growth 'absolutely crashing' while value outperforms, driven by concerns about AI ROI and higher-for-longer interest rates.
VC— Venture capital has become 87% concentrated in AI investments, creating excessive exposure and lack of diversification, making it vulnerable to AI trade concerns.

Not investment advice.

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Market views