Technology investors who bought companies like Microsoft (MSFT), Nvidia (NVDA), and Apple (AAPL) before the artificial intelligence boom enjoyed substantial gains. More recently, however, chip firms like Taiwan Semiconductor (TSM) and ASML (ASML) fell to levels not seen since May 2024.
The sell-off suggests that the AI chip stocks potentially peaked.
The media speculates a great rotation is underway. Ahead of the tech selling, markets bought beat-up stocks like UnitedHealth (UNH) and Starbucks (SBUX). However, resource stocks like Vale (VALE) and Cleveland-Cliffs (CLF) continued to fall. The small-cap sector (IWM) broke out two weeks ago starting on July 12. Yet its rally is fading too.
The reversal in the mega-capitalization firms and small-cap firms is bearish. It would undermine the notion that the stock market is undergoing a great rotation. Investors should expect an increase in volatility in the near term. Watch the VXX short-term futures ETN (VXX). VXX stock gained 13.48% last week as price volatility increased.
Bitcoin (BTC-USD) closed at $66,631 last week. YTD, it is up by 51%.
Your Takeaway
The market will not rotate from one sector to another. Instead, individual stocks will outperform the market if the company posts strong quarterly results. Investors will need to stop speculating and start looking a fundamentals as a basis of buying a stock.
