The violent rotation out of Big Tech has dragged the Nasdaq 100 Index down 8% in just over two weeks, leaving it on the cusp of a correction. Whether it can avoid that dubious milestone will likely come down to earnings from a quartet of companies worth nearly $10 trillion combined.
The stakes were already high after a torrid first-half rally for Big Tech left the biggest companies with fat share-price gains and stretched valuations. They've become downright critical after Alphabet Inc.'s results last week raised concern that spending on artificial intelligence has gotten too rich relative to near-term returns.
Investors finally turned cautious about companies at the forefront of AI after ignoring for months warnings that their run was overextended. They've sold the Nasdaq 100 to the tune of $2.6 trillion and plowed into stocks that had long been laggards, including small companies and financial and industrial firms.
The rotation into cyclical pockets of the market began in earnest after a reading on June prices showed cooling inflation, stoking bets the Fed will cut interest rates as soon as September. The Russell 2000 has jumped 10% since then, while financial and industrial companies in the S&P 500 are up more than 3.5%.
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