Tech stocks just posted their worst week since April, with the Nasdaq tumbling 3% as bubble fears grip Wall Street. But analysts say strong earnings could prevent a deeper selloff, even as Goldman Sachs warns of a 10-20% market correction ahead.
The tech bubble debate is back with a vengeance. After months of relentless gains, technology stocks hit a wall this week, with the Nasdaq posting its worst weekly performance since April when it crashed 10%. The tech-heavy index shed around 3%, while the S&P 500 and Dow each dropped more than 1%. Wall Street's euphoria over artificial intelligence is colliding with harsh valuation reality. "You've got trillions of dollars tied up in seven stocks, for example," DBS CEO Tan Su Shan told CNBC. "So it's inevitable, with that kind of concentration, that there will be a worry about when will this bubble burst?" The warning comes as Goldman Sachs CEO David Solomon added to the growing chorus of caution. Speaking at Hong Kong's Global Financial Leaders' Investment Summit, Solomon predicted a significant correction ahead. "It's likely there'll be a 10 to 20% drawdown in equity markets sometime in the next 12 to 24 months," he said, according to CNBC reporting. But not everyone's hitting the panic button. The selloff might actually be healthy for markets that have been running on AI hype for months. Glen Smith, chief investment officer at GDS Wealth Management, sees potential "buying opportunities" emerging from the turbulence. More importantly, corporate earnings continue to validate the tech sector's fundamental strength. "Earnings have been reassuring despite worries about tech stocks' high valuations," Kiran Ganesh, multi-asset strategist at UBS, told CNBC. This earnings backdrop suggests the current pullback might be more correction than crash. The timing couldn't be more ironic. November historically ranks as the S&P 500's best month, averaging 1.8% gains according to the Stock Trader's Almanac. Instead, investors are grappling with concentration risk that's reached unprecedented levels. The concerns aren't unfounded. Apple, Microsoft, Google, Amazon, Meta, , and have become so dominant that their combined market cap dwarfs entire national economies. When these seven stocks move, they drag entire indices with them. Friday's mixed session illustrated this dynamic perfectly. While the S&P 500 and Dow managed slight gains of 0.1%, the Nasdaq closed 0.21% lower as tech names continued to struggle. The divergence shows how much market performance now depends on a handful of technology giants. European markets felt the spillover effects, with the pan-European Stoxx 600 dropping 0.55% as global investors reassessed tech valuations. The selloff reflects a broader shift in sentiment from growth-at-any-price to show-me-the-profits. What makes this moment particularly challenging is the lack of clear catalysts for the weakness. Unlike previous tech selloffs driven by rising interest rates or regulatory concerns, this pullback stems from pure valuation anxiety. Investors are essentially asking: can these companies ever grow into their astronomical valuations? The answer may determine whether this becomes a healthy reset or something much worse. For now, the earnings narrative provides some stability. Companies continue reporting solid results that justify at least some of their premium valuations. But with and other major firms warning of significant corrections ahead, the pressure is mounting on tech giants to prove their worth.
