Nasdaq 100: Broadcom Shines Amid Nvidia Selloff, Drone Stocks Fly Higher

Why Is the Nasdaq Surging Without Nvidia?

The Nasdaq Composite soared to a record high on Monday, despite Nvidia’s continued slide. Nvidia shares, down 1,7% on Monday, are now over 10% below their November high of $148.88, officially placing the stock in correction territory. Analysts attribute this decline to profit-taking after a meteoric 165% rise in 2024 and shifting momentum within the AI sector.

Meanwhile, other semiconductor stocks led the rally. Broadcom surged 11.21, building on a 24% spike from Friday. The company’s strong earnings report and a 220% jump in annual AI-related revenue have made it a new favorite among traders. Goldman Sachs and Barclays raised their price targets for Broadcom, citing its expanding customer base and robust execution.

Are Investors Rotating to Other AI Plays?

Beyond Broadcom, other chipmakers showed strength. Micron Technology rose 7% ahead of earnings, while Marvell Technology and Taiwan Semiconductor gained over 1%. Analysts suggest the recent pullback in Nvidia may reflect a broader shift as traders rotate into undervalued AI-related opportunities.

This trend underscores the growing appeal of diversification within the AI space, where stocks like Broadcom and Micron are gaining traction as long-term plays.

What’s Driving the Drone Stock Rally?

Drone stocks stole the spotlight Monday, with Red Cat Holdings surging 26.85% before ending the day up 16%. The rally followed news of Red Cat’s partnership with Palantir to integrate advanced navigation systems into its drones. Retail traders flocked to the stock, making it one of the top-discussed names on Reddit’s WallStreetBets, where its mentions jumped 1,625%.

Other drone companies followed suit. Unusual Machines climbed over 14%, while AeroVironment, Kratos Defense, and Axon Enterprise also notched gains. Analysts point to rising public curiosity about drones after a series of sightings across the U.S. fueled speculation about the technology’s future applications.

Could Policy Changes Boost U.S. Drone Makers?

Upcoming legislative moves could further bolster the domestic drone sector. Congress is advancing a provision in the National Defense Authorization Act to block Chinese drone maker DJI from selling to U.S. entities. If enacted, the measure would create opportunities for U.S.-based manufacturers like Red Cat and AeroVironment.

Additionally, analysts project increased government spending on counter-drone systems to protect critical infrastructure such as stadiums and airports. William Blair analyst Louie DiPalma highlighted this trend, forecasting a significant rise in public safety investments over the next decade.

Why Are Some Investors Hesitant About AeroVironment?

Despite Monday’s gains, AeroVironment remains under scrutiny. The company recently reported 4% revenue growth, but its earnings plunged 60%, raising concerns about its high valuation. AeroVironment’s price-to-earnings ratio exceeds 90, far higher than peers like RTX or Lockheed Martin, which also offer exposure to counter-drone technologies.

For traders, these alternatives may present better value plays in the growing drone defense sector. The stock finished 7.93% higher.

Market Forecast: What’s Next for Tech and Drone Stocks?

The Nasdaq remains positioned for further upside as traders rotate into undervalued AI and semiconductor plays like Broadcom and Micron. Nvidia’s underperformance could act as a near-term drag, but the broader tech sector looks robust.

In the drone sector, the outlook is similarly bullish, with rising government spending and public interest driving demand. However, valuations in some names may trigger profit-taking. Traders should focus on companies with strong fundamentals or those poised to benefit from legislative shifts and increased defense spending.

More Information in our Economic Calendar.