The Nasdaq 100 officially enters a correction zone, with tech giants dragging the index down more than 11% from its peak.

The Nasdaq 100 index officially fell into a technical correction zone on Friday, with the continued decline in technology giants’ stock prices pushing the index down more than 11% from its peak, marking an unprecedented stress test for the core drivers that supported the bull market over the past three years.

As of the time of writing, the Nasdaq 100 was down 1.22%, marking the first technical correction since April 2025 when market turmoil was triggered by Trump’s tariffs—typically defined as a decline of at least 10% but less than 20% from a recent high.

The ongoing war in Iran continues to shake investor confidence. Meanwhile, concerns about the returns on the massive expenditures by tech giants on artificial intelligence infrastructure are deepening, with these two pressures accelerating the current sell-off.

Nonetheless, Wall Street remains generally optimistic about the fundamentals of the tech sector. Analysts expect the “Tech Seven” to achieve a profit growth rate of 19% in 2026, surpassing the expected growth rate of 16% for the remaining S&P 500 constituents. After this significant pullback, the valuation of the Nasdaq 100 has become noticeably more reasonable compared to a few months ago.

Multiple Pressures Combine, Triggering a New Round of Technical Correction

The current adjustment in the Nasdaq 100 is not driven by a single factor.

According to Bloomberg, on the geopolitical front, the ongoing war in Iran continues to suppress market risk appetite; on the fundamental side, investors are increasingly cautious about the massive investments tech giants are making in AI computing power, and doubts are rising about when these investments can translate into more substantial financial returns.

Since the index peaked, Microsoft’s stock price has cumulatively fallen 34%, facing its worst quarterly performance since 2008; Meta, facing pressures from AI spending as well as additional impacts from legal issues, has seen a decline of 29% during this period.

Both companies are among the highest-weighted constituents of the Nasdaq 100, and their performance significantly influences the overall index performance.

Nvidia and Software Stocks Suffer Simultaneously, Impact Widening

The blow is not limited to the “buyers” of AI. As the biggest beneficiary of this AI investment frenzy, Nvidia has fallen 18% since its peak in October. The market is concerned that as expectations for the growth rate of AI computing power demand cool, the company’s rapid sales growth may be difficult to sustain.

The industry disruption expectations triggered by AI have also put pressure on the software sector, and the impact has spread to more sub-sectors.

Human resources software company Workday and Atlassian, which owns the Trello product, have both seen their stock prices cumulatively drop more than 40% since October 29, a decline that far exceeds the overall index, reflecting widespread market concerns about the expectation of AI reshaping the enterprise software landscape.

Valuation Returns to Rationality, Wall Street Maintains Long-Term Optimistic Judgment

Despite the fierce downturn, the long-term investment logic for the tech sector on Wall Street remains intact.

According to Bloomberg Intelligence data, the “Tech Seven” is expected to achieve a 19% profit growth in 2026; in contrast, the expected profit growth rate for the other 493 constituents of the S&P 500 is only 16%, demonstrating the significant profit growth advantage of the tech giants.

In terms of valuation, the Nasdaq 100’s current price-to-earnings ratio (based on expected earnings) has compressed from 28 times at its October peak to 21 times, slightly undervalued compared to the historical average over the past decade, increasing its appeal to some long-term focused investors.

Multiple bearish factors have been significantly priced in, but whether stability can be achieved will still depend on when AI investment returns can translate into substantial profit improvements.

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