Stocks tumbled on Monday, extending a dayslong slide that presents a dilemma: Should investors buy in at bargain prices or unload in fear of worse to come?
The tech-heavy Nasdaq plummeted 3% last week, the index’s largest weekly decline since the aftermath of President Donald Trump’s “Liberation Day” tariffs in April. The S&P 500 fell 1.6% over that period, ending three consecutive weeks of gains.
The trading marks a rare bout of turbulence on this year’s glide path to higher returns. Even after the losses, the S&P 500 remains up 15% in 2025. While the Dow Jones Industrial Average has climbed 11%, and the Nasdaq has soared 19%.
Two major culprits are to blame for the downturn, analysts said: Growing skepticism about the artificial-intelligence technology at the heart of the market rally, as well as a realization the Federal Reserve may keep interest rates higher for longer than many investors had previously expected.
Still, the analysts added, the decline is more likely to be a blip than a sustained downturn, even as they acknowledged uncertainty about the path forward for the U.S. economy.
“The market is taking a more sober look,” Steve Sosnick, chief strategist at trading firm Interactive Brokers, told ABC News, noting Wall Street had breezed past previous hiccups on the way to further returns. “Maybe the glass isn’t always completely half-full.”
The recent market decline has coincided with fears about tech giants dependent on AI, which make up a disproportionately large share of the S&P 500. As big-tech names spend hundreds of billions to build data centers necessary to run the energy-intensive technology, the financial benefits remain uncertain.
Market gains this year have been concentrated in a handful of tech giants, known as the magnificent seven: Alphabet, Amazon, Apple, Meta, Microsoft, Tesla and Nvidia. Worries over artificial intelligence have thrown cold water on the stocks in recent days, causing their prices to waver, some analysts said.
NVIDIA CEO Jensen Huang introduces an “Industrial AI Cloud” project during a press conference in Berlin, Germany, November 4, 2025.
Lisi Niesner/Reuters
“There’s a recognition that if they spend all this money on data centers, it will weigh on their earnings. And it’s not clear at this point how profitable those investments will be,” Ed Yardeni, the president of market advisory firm Yardeni Research and former chief investment strategist at Deutsche Bank’s U.S. equities division, told ABC News.
Investors are also reckoning with the decreasing probability of an interest rate cut at the Fed’s meeting next month.
Traders peg the chances of a quarter-point rate cut next month about 41%, well below where the odds stood two weeks ago, according to CME FedWatch Tool, a measure of market sentiment.
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The Fed cut its benchmark interest rate at a meeting last month, and policymakers projected an additional quarter-point cut in December. But stubborn inflation has prompted some Fed officials to voice caution about the further interest rate cuts. Prices rose 3% in September compared to a year ago, putting inflation a percentage point higher than the Fed’s target rate.
The prospect of an interest-rate cut typically boosts the stock market, since the promise of cheaper borrowing means a potential boon for firms and their investors. But the opposite also holds true, analysts said: As hope of a rate cut fades, stocks may turn lower.
“With increased uncertainty comes increased volatility – and that’s exactly what we’ve seen so far in November,” Bret Kenwell, an investing analyst at eToro, told ABC News, citing the interest rate expectations as well as a potential Supreme Court ruling that could do away with a large swathe of Trump’s tariff policy.
Despite acknowledging the recent strain, analysts signaled confidence about the path forward.
Ivan Feinseth, a market analyst at Tigress Financial, said the S&P 500 would finish the calendar year with an uptick from its current level of about 6,700 to 7,000.
Feinseth attributed his optimism to expectations of continued adoption of AI as well as resilient economic performance.
While hiring has slowed in recent months, the U.S. economy has continued to add jobs and sustain steady economic growth.
“Sometimes the market gets ahead of itself and everybody kind of panics,” Feinseth said. “But I still think the market’s momentum is to the upside.”