This article first appeared on GuruFocus.
The Nasdaq 100 (NASDAQ:QQQ) has slipped into correction territory, signaling a sharp shift in market tone as the index fell 1.1% to 23,335.13 and now sits about 11% below its October peak. This marks the first correction since the tariff-driven selloff tied to Donald Trump in April 2025, and the move appears to be unfolding against a backdrop of rising geopolitical tension from the Iran war alongside growing investor hesitation toward the scale and timing of returns from artificial intelligence spending. Market participants are reacting quickly to these overlapping pressures, with sentiment turning more cautious as headline risk begins to outweigh the strong leadership tech had maintained in recent years.
The selling pressure has been concentrated in the largest technology names that previously powered the rally. Microsoft Corp. (NASDAQ:MSFT) and Meta Platforms Inc. (NASDAQ:META) have emerged as notable drags since the index peaked on Oct. 29, falling 34% and 29% respectively, with Meta also facing additional downside linked to legal issues. The weakness is not limited to heavy spenders on AI infrastructure. Nvidia Corp. (NASDAQ:NVDA), a key beneficiary of AI-related demand, has declined nearly 19% over the same period as investors question how durable its growth from AI accelerators could be. Meanwhile, software names including Workday Inc. and Atlassian Corp. have dropped more than 40%, reflecting broader concerns that AI-driven disruption may weigh on parts of the enterprise software space.
Even so, the longer-term setup may not be fully broken. The so-called Magnificent Seven Nvidia Corp., Microsoft Corp., Apple Inc. (AAPL), Alphabet Inc. (NASDAQ:GOOG), Amazon.com Inc. (NASDAQ:AMZN), Meta Platforms Inc. and Tesla Inc. (NASDAQ:TSLA) are still projected to deliver profit growth of 19% in 2026, compared with 16% for the rest of the S&P 500. At the same time, valuations have reset meaningfully, with the Nasdaq 100 now trading around 21 times estimated earnings versus 28 times at its October peak and slightly below its longer-term average. That combination could suggest that while near-term sentiment has weakened, these companies may remain positioned to benefit if confidence around AI monetization begins to stabilize.