Several strategists on Wall Street think the market could very well recover the rest of this year after a steep sell-off last week led by artificial intelligence stocks. The S & P 500 fell 2.7% last week, its fourth consecutive weekly decline. The Nasdaq Composite tumbled 3.4%, pushing the Nasdaq into a correction — down more than 10% from a record set just last month. But “the correction is entering its final phase, in our view, as the S & P catches down to breadth and approaches our 7100–7300 downside range,” said Michael Wilson, chief U.S. equity strategist at Morgan Stanley, in a note Sunday. “A final retest of last week’s lows likely sets up a year-end rally.” Wilson has a 12-month S & P 500 target of 8,000, or 8.4% above Friday’s closing level. .SPX YTD mountain SPX year to date Funding concerns around AI have dented the stock market’s bull run in recent weeks. The VanEck Semiconductor ETF (SMH) is down 22% over the past month. The Roundhill Memory ETF (DRAM) has plunged about 30% in that time. But the selling may have gone too far. “We do not think AI is a continued sell here,” JPMorgan strategist Mislav Matejka wrote. “In fact, Tech drawdown is offering certain opportunities. The selloff was very sharp, and P/E compression extreme.” “If the Tech space stabilizes, upcycle will likely look more sustainable. The acceleration phase is behind us, but it doesn’t necessarily follow that we need to move into outright contraction next,” he added. Tech appeared to recover in early trading Monday. The S & P 500 tech sector jumped 2%, led by gains in Lumentum , which recently agreed to be acquired by Marvell Technology for about $115 billion, and Ciena . Gains were held back by a 5% drop in Nvidia after CEO Jensen Huang confirmed a relationship with an alleged Chinese spy. “Large-cap equity positioning is now in line with zero earnings growth for the S & P 500 while discretionary investors are aligned with growth turning negative,” Deutsche Bank strategist Parag Thatte wrote. “With the plunge [last] week, the risk-reward is now even more favorable.”
