Stock Buyers Hunt Bargains as Tech, Bitcoin Rally: Markets Wrap

Nobel laureate Paul Krugman, a City University of New York professor, discusses the current selloff in cryptocurrencies, arguing that the recent downturn in crypto markets is different from past cycles. Krugman attributes much of the recent price action to political factors, particularly the Trump administration's support and exposure. Bloomberg

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(Bloomberg) — A renewed wave of dip buying spurred a rally in tech stocks in the wake of a rout fueled by worries over the billions of dollars those firms are throwing at artificial-intelligence development. Bitcoin jumped after 50% plunge from from its October peak. Silver and gold also bounced.

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Following a drawdown in some of Wall Street’s most-crowded trades, the S&P 500 rose 1%, holding gains as data showed consumer sentiment hit a six-month high. Software firms — which bore the brunt of the recent selling — climbed, with an exchange-traded fund tracking the group up 1.5%. A key measure of chipmakers soared 3.5%, with Nvidia Corp. leading the charge. Amazon.com Inc. sank 8% after vowing to spend $200 billion on AI.

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In an episode reminiscent of the response to DeepSeek’s AI model at the start of 2025, a new AI automation tool from Anthropic PBC sparked selloff in shares across the software, financial services and asset management sectors that spread to the broader market earlier this week.

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“My view: this is overdone,” said Kenny Polcari at SlateStone Wealth. “This is the moment to keep your head on straight. It is not the time to panic. For long-term investors, this is the time to go shopping. A lot is on sale.”

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The recent rout in technology stocks is a reason to buy the dip in the broader market as the US economic outlook remains robust, according to Anwiti Bahuguna at Northern Trust Asset Management.

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“It’s clearing off some of the froth in the markets,” she said. “We are actually seeing the use case for AI become clearer. From a macro sense, this is not the time to panic.”

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About 400 shares in the S&P 500 rose. While the Nasdaq 100 also bounced, the tech-heavy gauge was set for its worst week since November. The Russell 2000 index of small firms climbed 2% Friday. 

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Bitcoin reclaimed around half of the losses registered during Thursday’s meltdown – the largest since the collapse of Sam Bankman-Fried’s FTX exchange that roiled the sector more than three years ago. The token surged almost 8% to hover near $68,000.

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The yield on 10-year Treasuries climbed four basis points to 4.22%. The dollar fell 0.3%.

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“The performance of tech is likely to determine if this early bounce in the broader market can hold,” said Tom Essaye at The Sevens Report. “If tech stocks can hold early gains and add to them, then we could see a solid bounce across markets.”

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Four of the biggest US tech companies together have forecast capital expenditures that will reach about $650 billion in 2026 — a mind-boggling tide of cash earmarked for new data centers and all the gear housed within them. The spending planned by Alphabet Inc., Amazon, Meta Platforms Inc. and Microsoft Corp. is a boom without a parallel this century.

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“The question isn’t: Will AI be profitable?” said Florian Ielpo at Lombard Odier Asset Management. “But: are profits imminent? This temporal dimension constitutes a predominant market theme, and this week’s slight increase in risk aversion actually conceals a profound sector rotation, with investors moving away from the best-performing stocks of recent quarters.”

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No matter what happens today, the issues surrounding the software companies — and the profitability of the AI industry — are not going to go away, according to Matt Maley at Miller Tabak.