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Nasdaq Index: Bearish Forecast as AI Concerns, Bitcoin Slump, and Falling Yields Weigh on US Stocks

By:
James Hyerczyk
Published: Feb 25, 2025, 10:29 GMT+00:00

Key Points:

  • Nvidia's earnings report Wednesday could make or break the AI trade, with analysts watching for a spark of renewed optimism.
  • AI trade jitters hit markets as Microsoft scales back data center spending, sparking a tech-led selloff on Monday.
  • Bitcoin drops 4.5% to $89,791, erasing pro-crypto gains from earlier this year, as risk-off sentiment sweeps through cryptocurrencies.
  • 10-year Treasury yield falls to 4.355%, signaling economic fears as traders shift to safe-haven bonds amid U.S. slowdown worries.
  • Warren Buffett holds $334B cash as Berkshire Hathaway eyes potential market downturn; caution spreads among top investors.
Nasdaq Index: Bearish Forecast as AI Concerns, Bitcoin Slump, and Falling Yields Weigh on US Stocks
In this article:

AI Trade Jitters Spark Broader Market Selloff

Financial markets turned risk-averse on Monday as doubts over the artificial intelligence (AI) trade, a rush into Treasury bonds, and a sharp drop in cryptocurrencies combined to sour sentiment. The trigger came from a TD Cowen report suggesting Microsoft is scaling back data center spending, raising fears that AI demand may be waning.

Daily Microsoft Corp.

This bearish signal, coupled with broader economic uncertainties, ignited a tech-led selloff that pulled the S&P 500 and Nasdaq Composite into the red.

Market veterans like Warren Buffett and Steve Cohen added to the caution, with Buffett’s Berkshire Hathaway holding a record $334 billion in cash and Cohen warning about potential economic fallout from Trump administration policies.

Flight to Safety Pushes Treasury Yields to Multi-Month Lows

Daily US Government Bonds 10-Year Yield

As equity markets faltered, bond traders sought refuge in U.S. Treasuries, driving yields to their lowest levels since mid-December. The 10-year Treasury yield dropped 5.5 basis points to 4.355%, while the 2-year yield slid to 4.137%.

This bond rally signals rising concerns over a slowing U.S. economy, exacerbated by federal job cuts and tariff risks. Sticky inflation remains a critical issue, limiting the Federal Reserve’s room to maneuver on interest rates. The bond market’s move reflects a broader defensive shift, with traders increasingly hedging against potential economic and market volatility.

Bitcoin Breaks Down as Cryptos Follow Risk-Off Trend

Daily Bitcoin (BTCUSD)

Bitcoin joined the downturn, falling 4.5% to $89,791—its lowest since November. Ethereum also tumbled, losing over 8% to trade at $2,407. Bitcoin has now shed 4.5% year-to-date, erasing gains made after President Trump’s pro-crypto rhetoric earlier in the year.

Recent setbacks, including a $1.4 billion hack at crypto exchange Bybit and a memecoin scandal involving Argentina’s President Javier Milei, have damaged sentiment. The broader move away from risk assets underscores how cryptocurrencies are struggling to maintain their appeal in a cautious market environment.

Tech Stocks Hit Hard as Market Risks Intensify

Daily Palantir Technologies Inc

The tech sector led Monday’s declines, with Palantir plunging over 10% on extended selling pressure. Microsoft lost 1% as concerns over its data center spending plans circulated, while Nvidia dropped 3% ahead of its earnings report on Wednesday.

Daily Nasdaq Composite Index (IXIC)

The Nasdaq Composite has now turned negative for 2025, with analysts noting that the AI-driven tech rally may be losing steam. Jefferies highlighted that Microsoft’s potential cutbacks in AI infrastructure spending could be an early indicator of broader market challenges for AI-linked stocks.

Daily NVIDIA Corporation

Nvidia’s earnings will be a crucial test for the AI narrative, with traders watching closely to see if management provides a catalyst for renewed optimism. However, caution remains high as supply concerns and competition from China’s DeepSeek weigh on sentiment.

Market Forecast: Bearish Bias Likely to Persist Across Asset Classes

The market’s immediate outlook remains bearish, with risk aversion spreading from equities to bonds and cryptocurrencies. Falling Treasury yields reflect a defensive stance, while Bitcoin’s slump highlights diminishing risk appetite.

Traders should consider defensive strategies, such as holding cash, selling into market rallies, and reducing exposure to high-volatility assets. The tech sector, particularly AI-related stocks, could face continued pressure as sentiment shifts. A prudent approach is recommended, with an emphasis on protecting capital as markets navigate growing uncertainties.

More Information in our Economic Calendar.

About the Author

James Hyerczyk is a U.S. based seasoned technical analyst and educator with over 40 years of experience in market analysis and trading, specializing in chart patterns and price movement. He is the author of two books on technical analysis and has a background in both futures and stock markets.

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