Tech’s rally has cooled as investors weigh stretched valuations, AI doubts, and competition from other sectors benefiting from lower rate prospects, according to The Wall Street Journal. The Magnificent Seven stocks face a key test with Nvidia’s upcoming earnings. Individual investors have begun trimming exposure, with data showing net selling last week. Analysts said the Nasdaq’s 41% surge since April has pushed major tech firm valuations to excessive levels, setting the stage for a pullback. Investor jitters over high inflation, labor market weakness, and Powell’s rate stance were compounded by OpenAI’s poorly received GPT-5 launch. Meta froze AI hiring and an MIT study found little revenue impact from AI adoption. Investors are shifting into defensive plays like energy, real estate, utilities, and consumer staples, betting lower rates will boost those sectors. Seasonal thin trading volumes in August may amplify swings, adding volatility as Wall Street reassesses the AI trade.
