Nasdaq 100 forecast: Tech stocks rebound but AI concerns linger

Technology stocks staged a sharp recovery on Friday, but will the gains hold into the close? All major AI-related stocks – Nvidia, AMD, Broadcom and Core Weave – bounced back. But whether recovery holds is another matter. After Thursday's brutal sell-off wiped trillions of dollars off global equity valuations, today’s bounce has carried the Nasdaq 100 straight back into former support, and the worries behind the rout, from AI regulation to the sheer scale of tech spending, have not gone away. With the index still carving out lower highs and lower lows, we maintain a cautious Nasdaq 100 forecast, and the near-term risk remains tilted to the downside.

 

• The Nasdaq 100 has rebounded from support but is now testing former support turned potential resistance.
• Fears of tighter AI regulation after the Democrats' midterm sweep, and doubts over AI spending, still hang over the sector.
• Friday's bounce looks more like short covering and bargain hunting than a decisive shift in sentiment.

 

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Why has the Nasdaq fallen so sharply recently?

 

The immediate catalyst for the sell-off was concern that the Democrats’ sweeping midterm victory could usher in tighter regulation of AI development and data-centre investment. With the party now controlling both chambers of Congress, the prospect of greater political scrutiny has become harder for investors to dismiss.

 

That has changed the near-term calculus for the sector's biggest names. Nvidia, AMD, Broadcom and CoreWeave all bounced back on Friday, but a recovery in share prices is not the same as a resolution of the political risk. Until investors have a clearer sense of what a Democrat-controlled Congress intends to do, that uncertainty is likely to linger over any rebound.

 

Regulation is only part of the problem. Questions over the enormous capital commitments being made by technology companies, and whether the eventual returns will justify the spending, are becoming increasingly difficult to ignore.

 

Strong jobs report unlikely to lift concerns

 

An unexpectedly strong October jobs report, showing 165,000 new positions, offered some support to the broader market, but did little to resolve those underlying concerns. Friday’s rebound may therefore reflect short-covering and bargain hunting rather than a decisive improvement in sentiment towards the AI trade.

 

Technical Nasdaq 100 forecast and key levels to watch

 

From a technical analysis point of view, the Nasdaq 100 forecast remains cautious despite Friday's impressive bounce. The index rebounded from the 26,000 to 26,255 area, the double-top high from late last year and early this year that it broke through in April and had not retested from above until this week. The bounce has now taken it into the 27,058 to 27,493 region, between the July low and Wednesday's low, which was support until Thursday's breakdown and could now turn into resistance.

 

 

If that resistance holds, a return to 26,000–26,255 could be on the cards for our US Tech 100 chart, derived from the underlying Nasdaq 100 futures, followed by the psychological 25,000 level and then the March lows around 22,700. Break higher, and the 200-day moving average around 28,100 could be the next stop, with the shaded resistance region above it the next upside objective. For now, however, the path of least resistance remains to the downside, and the series of lower highs and lower lows suggests one has to stay cautious until the charts say otherwise.

 

Frequently asked questions

 

Is the Nasdaq 100 rebound a dead cat bounce?

It is too early to say, but the series of lower highs and lower lows suggests caution until the charts say otherwise. The rebound is now testing the 27,058 to 27,493 area, which was support before Thursday's breakdown.

 

What would turn the Nasdaq 100 outlook bullish?

A sustained move back above the 27,058 to 27,493 region would be the first sign of improvement. Above that, the 200-day moving average around 28,100 is the next hurdle.

 

Why did tech stocks fall after the US midterm elections?

Investors worried that the Democrats' control of both chambers of Congress could bring tighter regulation of AI development and data-centre investment. That came on top of existing doubts over whether the sector's heavy capital spending can pay off.

 

-- Written by Fawad Razaqzada, Market Analyst | Follow Fawad on Twitter @Trader_F_R