The crown jewel of Wall Street — the Nasdaq 100 — has been taking a beating for the last two days —due to the apparent “AI fatigue.” Several questions have been raised on the scalability and profitability of the massive infrastructure spending that big tech companies are indulging in to enhance artificial intelligence (AI) experiences. But will these pay off later than expected? At least, the latest earnings from some big tech giants gave such cues.
On Jul 24, 2024, the tech-heavy Nasdaq 100 Index witnessed a considerable downturn, retreating more than 3%, marking its worst day since October 2022. That’s not the end. The index fell more than 1% on Jul 25 as well. The S&P 500 is also no different as the index has considerable exposure to information technology.
The downturn was mainly caused by Alphabet Inc.'s GOOGL earnings report, which highlighted increased capital expenses. Tesla Inc.’s TSLA stock also came under pressure following a lack of details from CEO Elon Musk on the company's self-driving vehicle efforts. Many are worried about the high valuations of the big tech stocks (read: Worried About Tech Selloff? ETF Strategies to Play).
Market Impact
Investors are likely to rush toward fear-induced selling. The sudden rise of chaos in the market brightened the appeal for safe-haven assets. Volatility ETFs that track the implied volatility of the market also surged thanks to the massacre in the stock market. iPath Series B S&P 500 VIX Short-Term Futures ETN VXX was up 0.8% on Jul 25, 2024.
Below, we highlight a few of the biggest gainers from the latest sell-off in the stock market. Also, these ETFs may continue to shine should tensions persist in the near term.
Gold
Gold is often viewed as a hedge against market risk. The metal has seen some strength lately thanks to this market turmoil. Gold bullion ETF SPDR Gold Trust GLD gained 0.13% after hours on Jul 25. The Fed is likely to cut rates in September. If the Fed cuts rates, gold — a non-interest-bearing asset — might gain strength.
Yen
Yen is viewed as another safe-haven asset. Japan has historically had low inflation rates, which helped maintain the value of the yen over time. Japan often runs a current account surplus, meaning it exports more than it imports, which supports the yen's value. Japan's current account surplus in fiscal 2023 surged 2.8 times from the previous year to hit a record high of ¥25,339 billion. Invesco CurrencyShares Japanese Yen Trust FXY has gained 2.3% this past week.
U.S. Dollar
Although the Fed is likely to slash rates in the near term and the U.S. dollar is likely to lose value subsequently, the upbeat U.S. GDP data released for the second quarter of 2024 should support the greenback’s strength. Invesco DB US Dollar Index Bullish Fund UUP has added 0.2% in the past week.
Short-Term U.S. Treasury Bond ETFs
iShares Short Treasury Bond ETF SHV has gained 0.1% past week. U.S. short-term treasury bond is yet another asset that is likely to gain strength in price if the short-term yields fall on a likely Fed rate cut. The ETF SHV has gained 0.1% this past week.
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SPDR Gold Shares (GLD): ETF Research Reports
iPath Series B S&P 500 VIX Short-Term Futures ETN (VXX): ETF Research Reports
Invesco CurrencyShares Japanese Yen Trust (FXY): ETF Research Reports
Invesco DB US Dollar Index Bullish ETF (UUP): ETF Research Reports
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
iShares Short Treasury Bond ETF (SHV): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
