Tech stocks bounce back as Nvidia probe tempers gains

Technology shares recovered part of last week's losses in Asia and Europe on Monday, November 9, after a selloff driven by fears that Democrats' midterm victories would slow the AI data-center buildout. A board probe into Nvidia CEO Jensen Huang held the gains back, AFP reported. "A fragile recovery in (stock) markets was seen across Asia and Europe on Monday," said Russ Mould, investment director at AJ Bell, according to AFP.afp.com

Asia Leads, Europe Follows

Markets heavy with AI-linked stocks led the early gains. Japan's Nikkei 225 rose as Tokyo Electron and Advantest rallied. TSMC Taiwan Semiconductor Manufacturing Company Limited ↗ 3.51% lifted Taiwan's Taiex, and SK hynix ↗ 5.53% and Samsung advanced in Seoul, Euronews reported via Yahoo Finance. The rally did not hold everywhere. The Kospi and Hang Seng Index both closed lower, while London's FTSE 100, Frankfurt's DAX and Paris's CAC 40 gained in late-morning trading, AFP data showed.finance.yahoo.com+1

On Sunday, Nvidia's board opened an investigation into whether Huang had been targeted in a foreign espionage plot, after he admitted to an affair with an executive whom US intelligence officials reportedly linked to Beijing. China called the claims "baseless," AFP said. Mould said US futures pointed to a mixed open, with the Nasdaq "going back into reverse."afp.com

A Historic Drop

Selling peaked on Thursday, November 5. The S&P 500 ↗ 2.37% tech sector sank 7.3% and the Philadelphia Semiconductor Index PHLX Semiconductor Index ↗ 7.03% fell more than 12%. For both, it was the biggest one-day drop in more than six years, Reuters reported via Business Recorder. The Nasdaq Composite ended that day in correction territory, nearly 12% below its October 6 record. Hedge funds sold global tech stocks at one of the fastest paces on record, with net selling roughly matching the high in Goldman Sachs ↗ 4.67% data going back to 2016, Bloomberg reported.brecorder.com+1

The selloff made tech look cheaper. The sector's forward price-to-earnings ratio dropped to 17.1, below the 17.9 for the S&P 500 as a whole. That was the first time since 2017 that tech has traded at a discount to the broader market, according to Reuters via The Globe and Mail.theglobeandmail.com

CPI and Earnings Ahead

The October Consumer Price Index comes out on Tuesday, November 10. Fed funds futures had priced roughly a 65% chance of a rate hike at the Federal Reserve's December 8–9 meeting, Reuters reported. CoreWeave ↗ 5.56%, the cloud company at the center of worries about how the AI buildout is financed, also reports on Tuesday. Applied Materials ↗ 11.37% and Cisco ↗ 5.11% report later in the week, and Nvidia's results are due November 17, according to Reuters.theglobeandmail.com+1

"Fears around AI regulation, the outlook for (capital expenditure) and free cash flow have been the driver of risk reduction in recent weeks and these issues are not likely to be resolved with any conviction in the near term," said Sally Auld of National Australia Bank, per Euronews.finance.yahoo.com