Tech Stocks Tank as Rate Cut Hopes Fade, Wall Street Takes a Breather

A Cold Shower for Tech Bulls

After Wednesday’s optimism, Thursday’s trading session was a stark reminder that markets don’t move in a straight line, especially not when the Fed is still playing hard to get.

A wave of selling pressure hit Wall Street, led by a sharp rotation out of richly valued tech names into more defensive sectors. The Nasdaq fell 2.3%, while the Dow Jones dropped 1.65%. It was one of those days where even your best ideas feel like bad bets.

Rate Cut Odds Dwindle

There’s growing skepticism that the Fed will actually deliver a rate cut in December. Fed Chair Jerome Powell’s recent remarks were lukewarm at best, and with the US government finally back up and running after a 43-day shutdown, we’re bracing for a flood of delayed economic data.

That is if the data even exists.

According to the White House, some key figures (like October inflation) may have been lost in the bureaucratic black hole caused by the shutdown. The CME FedWatch Tool now sees the probability of a December cut at just over 50%, the lowest since July. Just 24 hours ago, that number was over 60%.

Meanwhile, the yield on the 10-year Treasury rose another 3 basis points to 4.10%, putting more pressure on interest-rate-sensitive tech stocks.

AI and Growth Names Take the Hit

Let’s talk names. Palantir (PLTR | -6.53%) and Nvidia (NVDA | -3.50%) led the decline in AI-related stocks. Nvidia’s drop came just days before its upcoming earnings report, while Palantir saw a classic valuation reset after a strong run.

Other chip-related names like Micron (MU | -3.25%) and Western Digital (WDC | -5.39%) also dropped, likely in sympathy with a 22% plunge in Japanese peer Kioxia.

Meanwhile, speculative and high-beta names were not spared either. Tesla (TSLA | -6.64%) and Robinhood (HOOD | -8.61%) dropped sharply. While not AI leaders per se, these stocks are more vulnerable in a market where interest rate expectations are swinging and investors are de-risking.

On a day like this, it’s easy to forget that just weeks ago, AI was the holy grail. Yesterday, it was a liability.

Disney Earnings Letdown

And then there’s Disney (DIS | -7.75%). This wasn’t about macro or AI, it was a direct reaction to a mixed fiscal Q4 earnings report. While the company showed progress in cost-cutting and streaming profitability, the market was underwhelmed by slightly lower-than-expected revenue and ambitious long-term forecasts. After a run-up into earnings, investors clearly chose to cash out.

Cisco Defies the Trend

In a sea of red, one name glowed green: Cisco (CSCO | +4.62%). The networking giant not only beat earnings expectations but also lifted its full-year guidance. Sales for Q1 (August–October) rose 8% to $14.9 billion, and EPS landed at $1.00, both topping analyst forecasts. The company now expects FY26 revenue between $60.2B–$61B (about $1B higher than previously estimated), with EPS guidance raised to $4.08–$4.14.

More interestingly, CEO Chuck Robbins said demand for AI infrastructure is accelerating, especially from cloud giants like Amazon, Microsoft and Alphabet. Orders from these players for AI-related equipment jumped from $800 million to $1.3 billion quarter over quarter. Unlike other tech names, Cisco seems to be selling the picks and shovels in the AI gold rush.

Google Faces Fresh EU Scrutiny

In other tech news, Google (GOOGL | -2.84%) is back in hot water in Europe. Regulators launched a new investigation into the company’s AI-generated summaries showing up atop search results. Several websites claim they’ve seen traffic plummet since Google’s AI snippets began taking center stage, potentially violating the EU’s Digital Services Act. It’s another reminder that Big Tech’s dominance won’t go unchallenged, at least not in Brussels.

Currency & Commodities Check

The euro/dollar pair moved up to 1.1641, while oil prices ticked 0.5% higher, rebounding from Wednesday’s slump.

Final Thought: Tech’s Not Dead, It’s Just Tired

What we’re seeing now isn’t a tech apocalypse, it’s a well-deserved reality check. Many of these names ran too far, too fast, priced for perfection in a world that’s still full of uncertainty. Until rate cut expectations firm up, I wouldn’t be surprised to see more volatility ahead.

But don’t write off AI just yet. If Cisco’s numbers are any indication, the real winners might not be the flashy front-end names, but the quiet infrastructure players building the digital backbone of the future.

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Kristoff - ChartMill

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