The recent action in tech stocks has many on Wall Street walking on egg shells. Tech got rocked this week, with the Technology Select Sector SPDR fund (XLK) losing 2.6% through Thursday’s close, on pace for its biggest weekly decline since May. Nvidia and Palantir Technologies , two of the sector’s stalwarts this year, have also been crushed. The former is down 3% week to date, while the latter has slid more than 11%. Traders pointed to several reasons for the tech wreck, including an MIT study showing that just 5% of companies using generative AI get a return on their investment, as well as profit-taking from some of 2025’s top performers. Regardless of the catalyst, the pullback leaves investors wondering if they should buy the dip once again — or brace for an even bigger decline. “The weight of the evidence in our work indicates that the recent setback in the tech sector is a necessary reset within a still-constructive long-term trend,” Keith Lerner, chief market strategist at Truist, wrote Thursday to clients. “The sector’s ‘rubber band’ was stretched after its sharpest four-month rebound since 2000, making it more vulnerable to negative headlines. That said, tech’s trailing one-year return is not at an extreme.” .SPX 5D mountain SPX 5-day chart Tony Pasquariello, head of hedge fund client coverage at Goldman Sachs, is also sanguine on tech despite the declines, noting they’re more due to market positioning. “The month of August registered record hedge fund shorts in [Russell 2000] futures … and record hedge fund longs in [Nasdaq-100] futures. More broadly, momentum has been in a very long and very powerful uptrend over recent years … so perhaps this is nothing more than a dose of mean reversion,” wrote Pasquariello, one of the most widely followed voices on Wall Street. The problem? If tech falters, so does the rest of the market. Tech makes up 34% of the S & P 500’s entire market capitalization. Financials are a distant second, with a weighting of just 13.8%, according to S & P Global . There’s one wildcard that can tip the scales one way or another: Nvidia earnings. The chipmaker is set to report its latest financials next Wednesday after the bell, and analysts expect big jumps in year-over-year profits and revenue. If Nvidia can impress investors with its quarterly figures, then that may be enough to stem the tech bleeding and spur a turnaround. If not, then don’t expect the selling to subside.
