The Zhitong Finance App learned that in early trading of US stocks on Friday, technology stocks and semiconductor stocks continued to decline, and market sentiment continued to be tight between AI valuation concerns and high interest rates. However, strategists are sending a subtle signal: being overly bearish may be just as dangerous. On one side is the sharp sell-off experienced by AI transactions, and on the other side is the historical resilience shown by the S&P 500 bull market. Investors are standing at a crossroads where position structures need to be re-examined.
AI sell-off: Panic spreads, but the story is far from over
This week's weakness in tech stocks is not an isolated incident. According to the report, Anthropic's valuation in discussions with investors before a potential IPO has dropped from 2 trillion US dollars to 1.5 trillion US dollars, becoming the latest straw to crush sentiment. Meanwhile, semiconductor stocks have accumulated a decline of about 15% since last week. Earlier, there was news that Chinese memory chip manufacturer Changxin Storage (CXMT) is speeding up production. Vaneck Semiconductor ETF (SMH) and iShares Semiconductor ETF (SOXX) fell about 1% and 1.3%, respectively, before the market on Friday. XLK, which tracks the S&P IT sector, continued its decline.
However, SpotGamma's Brett Pachuba reminded the market not to extrapolate excessively linearly. In an interview, he pointed out that the overall story of AI's profitability is far bigger than Anthropic's. “Anthropic is a story, but the entire sector is far larger than Anthropic in terms of AI profitability and data center revenue.”
More importantly, he warned that there is a real “right-tail risk” in the market — if investors have insufficient positions and good news comes from giants such as Meta or Google, it may trigger strong upward chase during a period of extremely strong seasons. “Investors must be extra wary when entering a bearish pattern.”
Supported by market breadth and profit expectations
Carson Group's Ryan Detrick saw positive signals from the internal structure of the market. He pointed out that there were more rising stocks in the S&P 500 index than falling stocks, and sectors such as healthcare and finance showed strong performance. This broader participation suggests that the rotation of capital from the tech sector is more like a healthy rotation than a precursor to a general market collapse. “You must seize the opportunity to rebuild your portfolio and diversify your allocations in areas that have always been weak. Right now, it's technology stocks.”
Rob Haworth of U.S. Bank Wealth Management found comfort in the credit market and profit prospects. He said that although riskier borrowers are under pressure, credit pressure is still concentrated on lower-rated companies and has not spread widely. Citing strong third-quarter earnings growth expectations and prospects for further improvement in 2026, he believes this may help the S&P 500 index reach a new high before the end of the year. Detrick added that America's historical performance after the midterm elections is also a reason why the stock market should not be unduly bearish.
Baird: On the fourth anniversary of the bull market, history is still on the side of the bulls
Baird Wealth provided a more systematic framework for optimism in its October 16 report. This week, the S&P 500 bull market celebrated its fourth anniversary. Two days later, the index ended the record of not showing a decline of more than 1% for 53 consecutive days. Despite lingering bubble concerns, Baird pointed out that the duration and increase of this round of gains is still shorter than the average level of the post-World War II bull market.
Historical data shows that six of the previous seven rounds of the bull market continued to strengthen and enter the fifth year after four years, with an average increase of 13.4% in the seven rounds. Furthermore, including the US midterm election quarter and the next two quarters, have historically been the three strongest performing quarters in the 16-quarter presidential cycle.
High interest rates are a game changer: from momentum to quality
However, optimism doesn't mean all stocks will benefit equally. Baird clearly warned that “higher and longer” interest rates would change where market leadership belongs. Consumer inflation is higher than expected, increasing the possibility that the Federal Reserve will raise interest rates in October. Interest spreads on junk bonds have been high for many years, and investment-grade spreads are still below recent peaks. Baird believes that this environment will eventually benefit companies with strong cash flow, manageable debt, and regulated management, although momentum stocks and companies with weak balance sheets will lead the way for most of 2026.
Employment data provides a footnote to this judgment. In the first nine months of 2026, 612,000 new jobs were added in the US, far exceeding the 116,000 jobs in 2025. Stronger employment may ease concerns about the recent recession, while giving the Federal Reserve more room to fight inflation with higher interest rates.
Bank of America strategist Michael Hartnett is more cautious. He said his team will maintain a safe-haven stance for the next three to four weeks, citing an inflation-adjusted yield of 3%. He expects the Federal Reserve to raise interest rates in October. The position is more hawkish than market pricing, and suggests risks such as midterm elections, sticky inflation, and AI spending on debt financing. Hartnett is inclined to increase exposure to potential “peaking yield” beneficiaries, including small-cap stocks, real estate investment trusts, and non-essential consumer goods stocks. “We're not increasing tech stocks,” he said bluntly.
For investors, extreme bearishness is just as dangerous as blindly chasing higher ground. The existence of right-tail risk means that once sentiment is reversed, the rebound may be rapid and intense; however, the high interest rate environment also means that speculative targets that lack profit support will face more stringent scrutiny. Baird's historical framework and midterm election rules provide reasons for long-term optimism, but Hartnett's short-term safe-haven stance also reminds that the fluctuation is not over yet.