The overnight U.S. stock market closed lower, is the rise of tech stocks reaching its peak?
On Monday in the overnight U.S. stock market, the three major indexes all fell, with the S&amp;P down 0.38%, the Nasdaq down 0.13%, and the Dow down 0.16%. Among the &#34;Big Seven&#34; tech stocks, five (Alphabet-C-C, Meta, Apple, Microsoft, Amazon) closed lower, with only NVIDIA and Tesla posting gains.
Specifically, NVIDIA barely rose by 0.35%, Tesla rose by 0.39%, while Alphabet-C, the parent company of Alphabet-C-C, saw the largest decline of 4.5%, dragging down the tech sector.
Overall, the decline spread across most sectors. Apart from the chip sector outperforming the market, with the Philadelphia Semiconductor Index and the Semiconductor Industry ETF SOXX both closing higher, and the consumer and energy sectors benefiting from Tesla's rise and the increase in oil prices, other industries experienced varying degrees of losses.
Following NVIDIA's earnings report last Thursday, this is the first collective decline in the U.S. stock market, indicating a cooling off of the market's enthusiasm for AI.
Hedge funds' massive sell-off accelerated the pullback in tech stocks. According to Wall Street News, after a wave of profit-taking, hedge funds that had aggressively bought NVIDIA before its earnings report have sped up their liquidation and exit, with the selling speed at its fastest in nearly 7 months.
Based on Goldman Sachs data, the intensity of hedge funds' selling this time ranks in the top 98% over the past five years.
Analysts also believe that after the earnings season, the EPS factors that drove the rise in U.S. stocks have come to an end, and the market's focus will shift to economic data and the timing of the Fed's interest rate cuts:
<blockquote>
This has raised some concerns about the sustainability of the growth momentum from now on. Since all major tech companies have released their earnings reports, the focus in the coming days will shift to economic data and the timing of interest rate cuts.
</blockquote>
However, on the flip side, mutual funds and retail investors are still fervently embracing the &#34;faith&#34; in AI, continuing to pour into tech stocks.
Goldman Sachs' stock sales and trading department stated that driven by long funds, demand for tech stocks surged in the late trading session last Thursday, with tech stocks accounting for 50% of the $3 billion net inflow; on Friday, the buying pace of long funds slowed down, and fund flows became more balanced (with slight selling of tech stocks).
UBS also mentioned that retail investors are not only buying tech stocks but also selling other stocks.
According to the report data from Robert Chechilio, a trader at UBS, last Friday, UBS's retail clients in the United States saw a capital inflow of $53 million, with buying interest mainly focused on AI concept stocks and technology ETFs. Funds outside the technology sector were heavily inclined towards selling.
The total capital inflow into AI concept stocks reached $168 million, with buying interest concentrated in NVIDIA and Palo Alto Networks. Following Friday's capital inflow, U.S. retail investors reinvested all the funds cashed out since May last year into NVIDIA, continuing to bet on artificial intelligence.
The report states:
<blockquote>
&#34;Excluding tech stocks, the S&amp;P has seen the most capital outflows this year, with some of the selling shifting towards investing in NVIDIA.&#34;
</blockquote>

NVDA

Since NVIDIA released its earnings report last Thursday, this is the first time the overall U.S. stock market has collectively closed lower, indicating a slight cooling off of the market's enthusiasm for AI.

The "Seven Sisters" saw five companies decline, with NVIDIA barely closing higher. Is the tech sector losing its momentum?