Tech stocks continue to struggle to kick off November

The Nasdaq-100 fell Monday, a punishing start to November for traders who piled into a risky leveraged ETF to bet on a rebound in tech stocks.

Some investors appeared a little too eager to buy the dip in technology stocks last month.

November trading began Monday with a popular leveraged exchange-traded fund that aims to provide three times the daily performance of the tech-heavy Nasdaq-100 NDX failing to hold its initial gains - one session after it saw its biggest daily inflow in more than a year and a half. The fund closed sharply lower Monday after traders on Friday poured $993 million into the ProShares UltraPro QQQ TQQQ, which marked the ETF's biggest haul in a single day since about $1 billion was seen on April 7, 2025, according to FactSet data.

The ProShares UltraPro QQQ initially saw a big bounce Monday morning but that rally quickly faded, with the ETF sinking following a deep, 20.5% loss in October as tech stocks struggled under renewed anxiety around the artificial-intelligence trade. The Nasdaq-100 retreated as selling pressure picked back up Monday, with chip stocks selling off sharply.

In the tech reset, semiconductor stocks are "ground zero for what's happening right now," said Keith Lerner, chief investment officer at Truist Wealth, in a phone interview Monday. "We're a patient bull for tech," he said, cautioning about more downside potential before "tech reasserts its leadership."

Last week, the Nasdaq-100 broke through its support level of 28,875, according to Katie Stockton, founder of technical research and analysis firm Fairlead Strategies. She told MarketWatch in a phone interview Friday that she'd be watching whether the Nasdaq-100 remained below that support level this week as a potential confirmation of its breakdown.

Chip stocks kicked off November in the red, with the PHLX Semiconductor Index SOX slumping 3.4% on Monday after losing more than 15% in October, according to FactSet data. The index has breached its 200-day moving average, a metric Lerner said that he's watching as a level of support that may or may not hold up, and holding sway over how soon tech may reclaim leadership.

Some traders who made leveraged bets on a turnaround in chip stocks in October got burned.

Late last month, a leveraged ETF that aims to provide a return of 300% of the daily swings of an underlying semiconductor index saw a record weekly inflow but continued to struggle. The Direxion Daily Semiconductor Bull 3X ETF SOXL tumbled 11.5% on Monday, after four straight weeks of losses, according to FactSet data.

Traders in leveraged ETFs can quickly find themselves deep in a hole that's difficult to climb out from when their bets go the wrong way. The Direxion Daily Semiconductor Bull 3X ETF booked a nearly 48% drop in October, as the carnage in chip stocks exceeded the Nasdaq-100's decline that month.

"The market is losing its patience" after setting high expectations for stocks involved in the AI trade, according to Lerner.

Investors worry that semiconductor stocks, which were red hot earlier in 2026 as the AI race created strong demand for chips, now risk seeing future revenues slow should hyperscalers rein in their torrid pace of spending on artificial intelligence, he said.

Many investors are questioning the massive spending on AI, as they want to see some plans around companies' capital expenditures that lay out a "a clear path toward profitability," along with some "clear guardrails" on their borrowing and equity financing amid concerns about the cost of the AI race, according to Lerner.

Cash flows are being questioned over concerns that they've in some cases already turned negative, he said, noting that "investors are being more demanding on their expectations."

Goldman Sachs strategists said in an Oct. 30 portfolio strategy note that companies' third-quarter earnings reported so far support their view that "AI-investment spending will continue to grow but that the growth rate of AI capex is peaking."

The strategists wrote that "hyperscalers are on track to spend roughly $800 billion in capex" in 2026, up 96% year over year. But they cautioned that analysts estimate year-over-year growth in hyperscalers' capex growth may slow next year to 44%.

"Decelerating AI-investment spending also signals decelerating earnings growth for the AI infrastructure complex," the Goldman strategists said, pointing to semiconductor and power companies as areas tied to the buildout of AI. "Consensus estimates show earnings growth for the AI infrastructure complex remaining strong but slowing sharply during the next few quarters."

The U.S. stock market was mixed Monday, with the Dow Jones Industrial Average DJIA up while the S&P 500 SPX and the Nasdaq Composite Index COMP each dropped. The S&P 500 was dragged down by its information-technology sector, which fell a sharp 2.7%, FactSet data showed.

-Christine Idzelis