Can Tech Earnings Halt Nasdaq's Three-Day Slide? Apple and Nvidia in Focus

Over the past week, the Nasdaq Composite Index has closed lower for three consecutive sessions, retreating from historic highs. Market participants are now focused on the upcoming earnings reports from tech giants—Apple (AAPL) and Nvidia (NVDA)—and whether their results can put an end to this correction, making it the central suspense in the current tug-of-war between bulls and bears.

Triple Pressure: Interest Rates, Valuations, and Geopolitical Risks

This downturn is not driven by a single factor. First, the U.S. Treasury yield curve has steepened again, with the 10-year yield climbing to a recent high, directly pressuring high-valuation tech growth stocks. According to Bloomberg, market expectations for the number of Fed rate cuts this year have been reduced from three to two, and the tightening liquidity outlook has prompted capital to exit high-beta sectors.

Second, the Nasdaq had surged over 30% in 2024, pushing the forward P/E ratios of some leading stocks back above 30 times. In the absence of new catalysts, profit-taking has naturally emerged. Additionally, recurring geopolitical tensions in the Middle East and uncertainty surrounding the U.S. election have led some hedge funds to reduce risk exposure. Data from Goldman Sachs Prime Brokerage shows a notable decline in long positions in the tech sector over the past week.

Earnings Season: The Stabilizing Effect of Apple and Nvidia

As the two largest companies by market cap in the Nasdaq, Apple and Nvidia's earnings will directly determine the index's short-term direction. For Apple, the market is closely watching whether the iPhone 16 series, boosted by AI features, can deliver a replacement cycle, and whether services revenue growth can maintain double-digit rates. If Apple reports better-than-expected sales data from China, it could effectively boost confidence in the consumer electronics sector.

Nvidia faces even higher expectations. Although rumors of shipment delays for its Blackwell architecture chips have caused some stock volatility, most analysts believe demand for AI computing power is far from peaking. According to Visible Alpha, consensus estimates for Nvidia's next-quarter revenue still project year-over-year growth of over 80%. The key lies in management's guidance for 2025 capital expenditures—if the guidance is conservative, it could trigger short-term selling; conversely, it could spark a rebound across the semiconductor sector.

Capital Flows: Early Signs of Defense and Rotation

In terms of capital flows, the Nasdaq 100 ETF (QQQ) saw net outflows of approximately $1.5 billion over the past three trading days, while defensive sectors like healthcare and utilities attracted net inflows. This suggests some investors are shifting from offense to defense. However, it is worth noting that retail investors, via platforms like Robinhood, are still buying tech stocks on dips, particularly Nvidia and AMD. This divergence between institutions and retail often signals that the market is approaching a critical turning point.

The options market also sends mixed signals. On one hand, the put/call ratio for the Nasdaq 100 rose to 1.2, the highest in three months, indicating increased hedging demand. On the other hand, open interest in call options for Apple and Nvidia remains concentrated in contracts expiring over the next two weeks, suggesting speculative capital is still betting on earnings-driven moves.

Outlook: Two Conditions for a Rebound

Overall, whether the Nasdaq can stabilize and recover depends on two key variables: first, whether Apple and Nvidia's earnings beat market expectations and provide optimistic forward guidance; second, whether the Fed's rhetoric at its November meeting signals continued easing. If both conditions are met, the index could find support near its 200-day moving average and resume its uptrend. Conversely, if earnings disappoint or the Fed turns hawkish, the Nasdaq could face a deeper correction, prompting further capital rotation into defensive assets.

For investors, the current phase calls for avoiding chasing highs or panic selling. Focus on the earnings call commentary from leading companies, especially management's views on AI investment returns, consumer spending trends, and geopolitical risks. Historical experience shows that volatility often rises before falling during the tech earnings season, and patiently waiting for clear signals is wiser than acting blindly.

Risk Warning

The above content is for reference only and does not constitute any investment advice. The stock market carries risks, and investment should be approached with caution. The stocks and indices mentioned are for analysis purposes only and do not represent recommendations to buy or sell. Past performance does not guarantee future results. Investors should make independent decisions based on their own risk tolerance.