The NASDAQ Composite snapped its recent winning streak this week, shedding roughly 2.10% over the last five trading sessions to close at 22,546.67. Investors were forced to navigate a “double whammy” of bearish catalysts: renewed skepticism regarding the profitability of heavy AI capital expenditures and robust economic data that suggests interest rates may remain higher for longer.

The AI ‘Reality Check’

The primary driver of the week’s volatility was a sharp reassessment of valuations within the artificial intelligence sector. While the week began with optimism, sentiment soured by Thursday as “AI disruption” fears took center stage. Notable heavyweights like Cisco Systems and AppLovin saw significant declines, dragging down the broader tech index. Investors appear to be rotating out of high-growth software names amid concerns that the massive capital pouring into AI infrastructure has yet to yield proportional returns in productivity or profit margins. This sentiment rippled through to unexpected sectors, with logistics and transportation stocks also taking a hit on fears of AI-driven displacement.

Macro Data Complicates the Fed’s Path

Beyond sector-specific woes, the macroeconomic picture added pressure on valuations. Wednesday’s labor market data came in surprisingly hot, with nonfarm payrolls adding 130,000 jobs—more than double the consensus forecast of 53,000. While a resilient economy is generally positive, in the current inflationary context, it undermines the case for imminent monetary easing. Market participants, who had been pricing in a potential rate cut this spring, are now recalibrating their expectations for June 2026 at the earliest. This “higher-for-longer” rate environment is particularly punishing for the growth-oriented constituents of the NASDAQ.

Technical Outlook & Israeli Context

Technically, the index suffered significant damage, falling from a weekly high of roughly 23,238 to test the 22,500 support zone. The ability of buyers to defend this level heading into next week will be critical. For Israeli investors, this correction is particularly relevant; the high correlation between the NASDAQ and the Tel Aviv Stock Exchange’s dual-listed technology giants means local portfolios likely faced similar headwinds. The weakness in US chip and software names often serves as a leading indicator for sentiment in the local high-tech ecosystem.

Looking ahead, investors should brace for continued volatility as the market digests the implications of the delayed rate cut timeline. The focus will shift to next week’s CPI inflation data, which could either validate the Fed’s hawkish stance or provide relief to battered tech valuations. Traders should monitor the 22,400 level as a key downside risk; a breach there could signal a deeper correction, while a reclaim of 22,800 is needed to restore bullish momentum.