Tech stocks extended their slide this week as trade tensions, regulatory pressure, and fading AI optimism weighed heavily on sentiment. While semiconductors struggled and hedge fund shorting intensified, gold continued to outperform, hitting its 17th record high of the year. With fresh tariffs and inflation data on the horizon, markets appear to be bracing for deeper macro dislocations.
Tariffs Rattle Tech While Yields Hold Ground
Nasdaq futures slipped 0.70% late Thursday, capping a sharp two-day sell-off that has left investors increasingly on edge. The tech-led decline reflects broader market anxiety, with chipmakers under pressure and regulatory clouds forming over Big Tech.
Sentiment deteriorated further after President Donald Trump announced a sweeping 25% tariff on all foreign-made vehicles. It was a direct warning to Canada and the EU: retaliate, and the penalties will escalate. Markets got the message. The Nasdaq Composite fell 0.5%, as traders began weighing the broader risks to global supply chains and already fragile tech earnings.
Meanwhile, 10-year Treasury yields held steady just below 4.4%, suggesting that bond markets are still clinging to the inflation narrative, even as equities brace for what could be a far more turbulent summer.
Nvidia’s AI Boom Narrative Faces a New Threat
Nvidia shares dropped 2.05% on Thursday, extending a sell-off that has now erased around 25% of the company’s market value since its January peak. This latest pressure comes from Beijing, where new energy-efficiency rules for data centres could limit deployment of Nvidia’s China-focused H20 chip, according to reporting by GuruFocus.
The H20 was designed to comply with U.S. export controls, which aim to restrict China’s access to advanced AI hardware. But in an ironic twist, it may be China’s own push to rein in power-hungry data infrastructure that ends up throttling demand. If fully enforced, the policy could force Chinese firms to scale back on high-performance AI chips, squeezing Nvidia’s prospects in one of its most important overseas markets.
For a stock that once looked untouchable in the AI boom, the narrative is starting to unravel. Geopolitical tensions, regulatory headwinds, and now domestic policy constraints are beginning to weigh on investor confidence.
Hedge Funds Turn Up the Pressure on Big Tech
Big Tech was already on the defensive. Now, hedge funds are getting involved. A report from Morgan Stanley, cited by Reuters, flagged Wednesday as one of the most aggressive single-stock selling days of the year, with a surge in short positions concentrated in the tech sector.
Nvidia, AMD, and Tesla were among the most targeted names, highlighting a decisive shift in sentiment. The rise in short exposure suggests hedge funds are no longer content to stay on the sidelines while valuations hover near cycle highs. The mood is shifting, and quickly.
With rates still elevated, policy uncertainty rising, and last year’s AI-fuelled rally starting to crack, tech is beginning to look exposed. Hedge funds appear to be betting that the sector’s outlook is not just fragile, but overpriced.
Chips Under Fire as Microsoft Pullback Raises Eyebrows
The chip sector remains under pressure, with the Philadelphia Semiconductor Index closing at 4,415.25 after a 2.07% drop on the day. Losses since the start of the year have now exceeded 11.5%, reinforcing a broader correction that has left investors questioning how much real momentum was behind the AI trade.
AMD continues to underperform, weighed down by concerns over slowing growth in key markets. Broadcom, by contrast, reported strong earnings, driven by steady demand for AI infrastructure and enterprise software. Marvell also delivered a top-line beat, suggesting that not every corner of the sector is struggling.
Even so, sentiment took another knock after reports emerged that Microsoft is scaling back its data centre expansion plans. That matters. Hyperscale buildouts have underpinned much of the semiconductor growth story, and any sign of hesitation from the sector’s biggest customers tends to ripple through fast.
Alibaba Warns of Speculative Overbuild in AI Infrastructure
Alibaba chairman Joe Tsai has added his voice to the growing concern, warning of froth in the AI data centre space, particularly in the United States. Speaking at the HSBC Global Investment Summit, Tsai noted that speculative builds are beginning to outpace actual demand, with some projects proceeding without firm uptake agreements in place.
With AI hype fuelling a global race to secure chips and energy capacity, some firms are building infrastructure first and trusting demand will catch up. The risk is clear: when commitments are lacking, over-provisioning becomes hard to avoid. That kind of imbalance might not show up in earnings right away, but in a capital-heavy sector like AI, the drag eventually surfaces.
Still, Tsai made it clear that Alibaba is not backing off. The company plans to invest around $53 billion over the next three years in AI and cloud infrastructure. It’s the largest and most focused investment cycle in Alibaba’s history — a signal that while the company sees risk, it is still betting heavily on the long-term value of foundational technology.
Gold Steals the Spotlight as Safe-Haven Flows Surge
While equities wobble and tech retreats, gold has quietly stolen the spotlight. Futures surged to $3,060 per ounce, marking the 17th record high of the year, powered by safe-haven flows, a weaker dollar, and continued central bank buying. Investors are rotating out of risk, and gold is enjoying the benefit.
Forecasts are climbing alongside the price. Goldman Sachs now sees gold finishing the year at $3,300. Bank of America has floated $3,500 as a possible target, though that hinges on a sustained pickup in investment demand. JPMorgan remains firmly in the bullish camp, pointing to gold’s long-term appeal as macro risks pile up and portfolio strategies shift toward defensive assets. These updated forecasts were reported by The Economic Times
With another round of reciprocal tariffs expected next week and fresh U.S. inflation data due, markets are bracing for more turbulence. Yields may be holding steady for now, but the flight to gold and mounting pressure on tech suggest that investors are positioning for something bigger — a deeper round of macro shocks that could soon come into sharper view.
For more coverage on gold price action and safe-haven flows, explore our dedicated Gold section
