Poor Performance

The Nasdaq fell roughly 3% last week, marking its worst performance since early April.

Context

The tech-heavy index had surged over 50% since April, when President Trump's announcement of sweeping tariffs sent the Nasdaq into a bear market – when a stock index (like the Nasdaq) falls 20% or more from its recent peak. Since then, optimism around artificial intelligence has driven the recovery of the stock market. However, concerns mounted last week about whether expensive AI valuations could be sustained and whether massive investments in the technology would pay off.

Major Selloff

Last week, concerns intensified after Nvidia's CEO reportedly warned that China could surpass the US in the AI race.

Major AI-focused stocks took significant hits, with Nvidia shares falling approximately 7% for the week and Palantir dropping about 11%. Oracle stock, which had soared 36% in a single day last September following an OpenAI partnership announcement, declined nearly 9% last week and erased most of its gains from that surge.

Small Recovery

Despite the week-long decline, stocks rebounded slightly from their lowest points on Friday. The S&P 500 fell as much as 1.3% during trading before closing slightly higher for the day, while the Nasdaq recovered from a 2% intraday loss. The Dow Jones index also turned positive after sliding more than 400 points earlier on Friday’s trading day.

Shutdown Impacts Market

The prolonged government shutdown, which also became the longest in US history last week, contributed to market uncertainty. The shutdown has prevented the release of key economic data, including the monthly jobs report. Data from private surveys suggested the labor market was cooling, which some analysts said could keep the Federal Reserve's rate cut plans on track for December.