Nasdaq Slides as Reality Bites AI Darlings

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•  06 Nov 2025
 

•   AAPL  
   
  +0.53%
•   ARM  
   
  -0.67%
•   DUOL  
   
  +2.07%
•   ELF  
   
  -3.10%
•   LMND  
   
  -0.45%

The market is speaking, and it's not whispering anymore. After yesterday brief rally that had some traders believing we'd dodged the correction bullet, Wall Street snapped back to reality today with the Nasdaq down 1.6% and major indices bleeding red across the board. If you thought Wednesday recovery was the start of a new leg up, the market just handed you a painful reminder that relief rallies and real reversals are two very different animals.

Wednesday felt almost too easy, didn't it? The Nasdaq climbed 0.6%, the Dow added 0.5%, and suddenly everyone was talking about buying the dip. Employment data came in stronger than expected with 42,000 private sector jobs added in October versus the 22,000 analysts had penciled in, and there was even chatter about Trump tariffs potentially getting struck down by federal courts. The VIX dropped 7.5%. Bitcoin pushed toward $104,000. Israeli stocks like $LMND rocketed 34% and $TEVA jumped 20%. It looked like the storm had passed.

But here's the thing about bear market rallies they're designed to hurt the maximum number of people. And today action suggests we might be in the middle of one. The weakness isn't just technical noise. It's fundamental doubt creeping into the most crowded trade of the decade: artificial intelligence.

And then there's Michael Burry. The guy who called the subprime crisis is now shorting $NVDA and $PLTR to the tune of $1 billion through put options. He's literally betting that the AI bubble is about to pop. Whether he's right or early and with Burry, early often looks a lot like wrong until it doesn't his positioning is symbolic of a growing unease on Wall Street.

Nvidia CEO Jensen Huang isn't helping the mood either. Speaking at the Financial Times' Future of AI conference in London, he warned that China is going to win the AI race against the United States. His reasoning? Excessive regulation and high energy costs in America versus generous government subsidies and cheap infrastructure in China. "China is racing ahead while we're busy debating and worrying" he said. It's a stark assessment from someone who should be the ultimate AI bull.

The macro picture is getting messier too. October saw the highest wave of layoffs in 22 years according to the Challenger report, suggesting we've moved from a hiring slowdown to actual job cuts. The government shutdown backdrop isn't helping confidence. And while yesterday ADP data showed modest employment growth, one month doesn't make a trend.

Individual stock action tells the real story. $QCOM dropped 2.8% despite beating estimates with $3 per share in adjusted earnings and $11.27 billion in revenue and guiding higher for next quarter. Why? Rising expenses. The market isn't rewarding growth anymore if it comes with bloated cost structures. $DUOL crashed 30% after disappointing booking guidance. $ELF plunged 25% on a reduced earnings outlook. These aren't small cap speculative plays these are established names with real businesses, and they're getting demolished.

There are winners today, sure. $AAPL gained 4.1%, $SNAP surged 20% on a Perplexity AI partnership worth $400 million annually, and $ARM jumped 5.6% on strong earnings. But these feel like isolated pockets of strength in a market that's fundamentally reassessing what it's willing to pay for future growth.

What's particularly unnerving is the speed. Just weeks ago, we were making new highs. Now the Nasdaq and S&P are at levels not seen since June. The rotation from "AI will save us all" to "wait, is this a bubble?" happened in days, not months. That kind of sentiment whiplash usually doesn't end with a quick V-shaped recovery.

Ed Yardeni, one of the more consistently bullish voices on Wall Street who nailed the recent rally, is now cautioning that excessive optimism is dangerous. He sees a potential 5% pullback through year-end but advises against panic selling. His message: if you have cash, buy dips, but don't try to time the bottom perfectly. It's measured advice that acknowledges we're in a tricky spot without screaming that the sky is falling.

So where does that leave us? Probably in that uncomfortable middle ground where the bull case isn't dead, but the easy money has been made. The AI trade isn't over the technology is real and transformative, but the valuations got ahead of themselves, and now we're repricing. How far that repricing goes depends on whether earnings can catch up to expectations, whether the Fed threads the needle on rates, and whether geopolitical uncertainties around trade and China stay manageable.

For traders with short-term horizons, this is a market for quick scalps and tight stops, not hero positions. For longer-term investors, this might actually be healthy. Markets that go straight up without pullbacks are the ones that crash hardest. A controlled correction that shakes out weak hands and resets sentiment could set up a more sustainable advance into 2026.

The volatility isn't going anywhere, though. With earnings season in full swing and every report becoming a referendum on whether growth stocks deserve their multiples, expect more days like today. The stocks that can actually deliver on their promises will be fine. The ones living on narrative and hope are going to get crushed.

If you're sitting on gains from the past year rally, taking some profits into this weakness isn't cowardice it's smart risk management. If you're looking for entries, patience is your friend right now. The market is in discovery mode, and sometimes the best trade is no trade until the picture clears up.

One thing is certain, the market is no longer giving anyone the benefit of the doubt. Whether that's the wake-up call we needed or the beginning of something uglier, we'll know soon enough. For now, respect the volatility, manage your risk, and don't fall in love with any position. This market will punish conviction as quickly as it rewards it.

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