Written by: He Hao
Source: Wall Street Insights
From tech stocks to gold to cryptocurrencies, the hottest trades on Wall Street that were being chased by a flood of capital every day are now rapidly retreating in a sudden shift toward risk aversion.
This time, there is no single trigger, unlike last April when the market plunged in a panic sell-off due to former President Donald Trump's launch of a trade war. Instead, a series of slowly accumulating messages have continuously sounded alarms, sparking anxiety about asset valuations—which many had long suspected had risen too high—and ultimately leading investors to retreat almost simultaneously.
Thursday's market action confirmed this once again:
The S&P 500 fell 1.2%, marking its third consecutive day of declines; the Nasdaq 100 index extended its losses, recording its deepest pullback since last April.
Software stocks continued their decline, as AI company Anthropic launched a new model designed for financial research, highlighting the competitive threat posed by new technologies.
Silver prices, which had previously hit record highs alongside gold, plummeted 17%.
Bitcoin plunged 10% in a single day, erasing all gains since Trump's election victory 15 months ago, as investors began unwinding leveraged, loss-making trades.
U.S. Treasuries rallied, once again playing their traditional role as the "ultimate safe haven."
Google's parent company Alphabet saw its stock come under pressure even after reporting better-than-expected revenue, due to its ambitious spending plans.
After the U.S. market closed on Thursday, Amazon's stock plummeted 10% as the company announced plans to invest $200 billion this year, far exceeding analyst expectations. These analysts are increasingly concerned about excessive spending by tech companies on artificial intelligence.
The recent market movements stand in stark contrast to the sentiment on Wall Street at the beginning of the year. Back then, strategists predicted that the U.S. stock market was poised for its longest winning streak in nearly two decades. These forecasts were based on several assumptions: the AI boom would continue, a resilient economy would continue to support corporate profits, and the Federal Reserve would cut interest rates.
This overall outlook largely remains intact, as evidenced by the steady stream of robust earnings reports in recent weeks. But at the same time, the market has refocused on a number of accumulating risks:
- Which companies will be left behind in the AI wave;
- Where monetary policy direction will head if Trump's nominee, Kevin Warsh, is confirmed to replace Jerome Powell as Fed Chair;
- And whether the valuations of assets—from gold and Bitcoin to tech giants like Alphabet—have become too high and are unsustainable in the long run.
The stalling momentum is particularly evident in Bitcoin:
For most of last year, speculative fervor triggered by Trump's election victory drove a rapid surge in cryptocurrency prices, but this month, the market has collapsed as investors pulled out massive amounts of capital.
On Thursday, as the trading day progressed, the sell-off in Bitcoin intensified, dragging down other cryptocurrencies, related ETFs, and "crypto vault" companies like Strategy that hold significant amounts of Bitcoin.
In the late afternoon New York time, Bitcoin plunged as much as 13%, falling below $63,000, nearly halving from the all-time high set just four months ago.
In the stock market, the declines were relatively moderate but the selling pressure was broad-based, with 9 of the 11 main sectors of the S&P 500 falling. Beyond worries about which companies will be losers in the AI technology wave, investors are also questioning whether the massive investments in this technology will ultimately pay off. The stock decline of Google's parent Alphabet is a manifestation of this sentiment.
Regarding the above movements, industry insiders pointed out:
People are clearly shifting to more defensive strategies. This is more of a 'shoot first, ask questions later' market environment. The fear and uncertainty across the market are palpable.
The recent pullback reflects market concerns that the hottest stocks and assets like gold had risen too fast and were due for a 'reckoning.' This is a reset. Momentum may have been overextended.
