The S&P 500 is severely diverging. How should we grasp the sector rotation in U.S. stocks?
Last night, TSLA dropped from -7% at the open to -5% at the close. Although there were fluctuations in between, the stock did not crash at the end, which can be considered a positive sign. It could also mean that the market had already priced in TSLA's sales data in advance.
Although Elon Musk and Trump have been arguing fiercely, they also had intense arguments last time, so institutions might be immune to it now. Otherwise, if institutions were to sell off, the stock wouldn't have risen slightly by 2% compared to the opening price at the close but would have entered a state of collapse. Therefore, this can be seen as a positive signal.
TSLA has been somewhat of an outlier these past two days—it doesn’t follow the decline of NVDA. So, it’s worth keeping an eye on TSLA's trend. However, many other tech companies tend to follow NVDA's stock price. Yesterday, when NVDA crashed, almost all tech stocks plummeted. Thus, NVDA is the bellwether of the entire tech sector and the core driver of its volatility.
Although the semiconductor sector appeared to be in dire straits yesterday, a closer look reveals severe internal divergence. You might have noticed something peculiar: NVDA actually fell quite a bit, around 3%. However, the triple-leveraged semiconductor ETF SOXL fell even less than NVDA itself, dropping only slightly over 1%.
The core reason lies in the severe internal divergence within the semiconductor sector. Traditional semiconductors were rising, while AI-related semiconductors were falling. For example, traditional semiconductor companies like ON Semiconductor, Texas Instruments, ON Semiconductor, Qualcomm, and Applied Materials actually rose yesterday, while AI-related semiconductors saw significant declines.
Therefore, we can see that this market movement is more about sector rotation—not just the broader shift from tech to consumer healthcare but also internal shifts within the semiconductor sector.
Meanwhile, Apple, which has been heavily criticized, has now become a 'golden apple,' rising consecutively to support the market. Under these circumstances, I believe it’s very difficult for the index to experience a major drop because companies like Apple are stepping in to stabilize it.
However, for the broader tech sector, caution is warranted because the S&P 500 is experiencing severe internal divergence. The index is being propped up by a few giants, while many companies have already plummeted.
The most typical examples are nuclear power and quantum computing companies without earnings support. Many people have been asking me about certain companies. If you look closely, companies without earnings or with excessively high P/E ratios are the first to fall in the current risk-averse market sentiment. This is why nuclear power and quantum computing stocks have been consistently declining—they generally lack earnings support, which is something to watch out for.
From a broader market perspective, although tech stocks fell sharply yesterday, ORCL actually closed higher. We’ve mentioned ORCL in our community before—it’s a potential buyer of TikTok, as stated by Trump himself, pending approval from the East. Additionally, ORCL has secured a large number of orders and has strong sales expectations, providing solid support during this tech rally. Therefore, I believe it’s worth tracking as a momentum stock in the AI sector.
That’s my current take on the tech sector.
Traditional companies, particularly those in the Dow Jones index, rose yesterday—consumer, healthcare, financial, and real estate/construction sectors all saw gains. This is why I emphasized focusing on banking and payment sectors in my video.
Most banks passed the Fed’s stress tests, and many have increased their dividends.
Yesterday, we saw financial ETFs like DPST surge, as did NAIL, which we’ve been discussing in our community. These are worth monitoring because the current market shows severe divergence in tech stocks while traditional sectors present good opportunities. Profitability is shifting, so timing is key.
2025 is destined to be a volatile year, requiring full digestion of the gains from the past two years. Thus, individual discipline is more critical than ever. Proper position management is essential, and those who prioritize strict discipline might consider joining our community.
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