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When Nvidia Sneezes, Does the Whole AI Market Catch a Cold?

MarketDash Editorial Team
19 days ago
Last week's tech selloff has investors rethinking their AI exposure. While semiconductor ETFs took the biggest hit, strategists see opportunity in software and cybersecurity as the next wave of AI beneficiaries.

Tech stocks had a rough week, and if you checked your portfolio recently, you might have noticed your AI holdings looking a little worse for wear. But before you hit that sell button on Nvidia Corp. (NVDA), Wall Street strategists have a message: relax, breathe, and whatever you do, don't panic.

Last week's selloff wasn't exactly fun to watch. AI darlings that dominated 2025 suddenly faced profit-taking, fading hopes for a December rate cut added to the gloom, and lingering bad vibes from the longest government shutdown in U.S. history didn't help either. But here's the thing: strategists speaking with Yahoo Finance aren't sounding the alarm bells. They're calling this routine profit-taking, not the beginning of the end for artificial intelligence.

For investors who prefer ETFs over picking individual stocks, though, this shakeout is revealing something important about where the real opportunities might be hiding.

The Concentration Problem Catches Up

When you load up on the biggest names in AI, you get the upside when things go well. But you also get the downside when they don't. That's the lesson ETF investors learned last week.

The funds that got hit hardest were the ones you'd expect: Invesco QQQ Trust (QQQ) and Vanguard Information Technology Index Fund ETF (VGT) both have substantial positions in Nvidia, Microsoft Corp. (MSFT), Alphabet, Inc. (GOOGL), and Meta Platforms, Inc. (META). When those giants stumble, these ETFs stumble too.

Then there are the semiconductor specialists. iShares Semiconductor ETF (SOXX) and VanEck Semiconductor ETF (SMH) can have Nvidia accounting for more than 20% of their portfolios. That's a huge bet on one company, and when that company has a bad week, well, you do the math.

The numbers tell the story: QQQ dropped 5% over five days, VGT slipped more than 6%, SOXX slid 8%, and SMH lost over 7%.

Alex Morris, CEO and CIO at F/m Investments, explained it to Yahoo Finance in straightforward terms. With such heavy concentration in AI names, when those stocks start to wobble, "the average will naturally fall more than you might expect." It's just math.

The Case for Spreading Things Out

This is where equal-weight ETFs start looking interesting. Funds like Invesco S&P 500 Equal Weight ETF (RSP) and Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE) don't let the mega-caps dominate everything. Instead, they give smaller AI-adjacent companies in cloud computing, cybersecurity, and enterprise software a meaningful voice.

According to FactSet data, nine of the S&P 500's eleven sectors are showing earnings growth compared to last year. That suggests there's life beyond the handful of AI superstars everyone obsesses over. Equal-weight funds let you capture more of that broader strength without betting the farm on whether Nvidia has a good quarter.

The Second Wave: Software and Security Step Up

Jeff Krumpelman, chief investment strategist at Mariner Wealth Advisors, told Yahoo Finance that this pullback is actually highlighting opportunities investors have been ignoring. His team isn't backing away from AI—they're just looking for it in different places.

Specifically, Krumpelman sees value in software and cybersecurity stocks that have been beaten down while everyone chased semiconductors. AI isn't just about building better chips; it's about the applications, the infrastructure, and the security layer that makes all of it work.

That brings funds like iShares Expanded Tech-Software Sector ETF (IGV) into focus for software exposure. WisdomTree Cloud Computing Fund (WCLD) covers the cloud infrastructure angle. On the cybersecurity side, there's First Trust NASDAQ Cybersecurity ETF (CIBR) and Global X Cybersecurity ETF (BUG).

Take ServiceNow Inc. (NOW) as an example. The stock is down roughly 20% this year despite being deeply embedded in AI-driven enterprise software. For long-term investors, that's starting to look like a discount rather than a warning sign.

The Fundamentals Still Look Solid

Here's something worth remembering while everyone's freaking out about short-term volatility: earnings are actually doing just fine.

Barclays recently reported that S&P 500 net margins hit 14.2%—a 25-year high. FactSet notes that 82% of companies have beaten their earnings per share expectations, with blended third quarter earnings growth coming in at 13.1%. Those aren't the numbers you see in a market that's fundamentally broken.

All Eyes on Wednesday

Of course, none of this market philosophizing matters much if Nvidia's earnings disappoint when they report on November 19. For the ETFs with substantial NVDA exposure—SMH, SOXX, QQQ, and VGT—this earnings release could either validate the "don't panic" narrative or send things spiraling further.

The stakes are particularly high for semiconductor-focused funds given their outsized Nvidia positions. A strong report could quickly erase last week's losses. A weak one could accelerate the rotation into those software and cybersecurity names strategists have been talking about.

For now, though, the prevailing wisdom on Wall Street is that the long-term AI story remains intact. The technology isn't going anywhere, the applications are still being built out, and we're probably still in the early innings of this transformation.

For ETF investors, this dip might actually be the healthy correction they've been waiting for—a chance to reassess concentration risk, explore broader exposure, and maybe pick up some quality names that got unfairly dragged down in the selling. Sometimes the best opportunities show up when everyone else is heading for the exits.

Back to News

When Nvidia Sneezes, Does the Whole AI Market Catch a Cold?

MarketDash Editorial Team
19 days ago
Last week's tech selloff has investors rethinking their AI exposure. While semiconductor ETFs took the biggest hit, strategists see opportunity in software and cybersecurity as the next wave of AI beneficiaries.

Tech stocks had a rough week, and if you checked your portfolio recently, you might have noticed your AI holdings looking a little worse for wear. But before you hit that sell button on Nvidia Corp. (NVDA), Wall Street strategists have a message: relax, breathe, and whatever you do, don't panic.

Last week's selloff wasn't exactly fun to watch. AI darlings that dominated 2025 suddenly faced profit-taking, fading hopes for a December rate cut added to the gloom, and lingering bad vibes from the longest government shutdown in U.S. history didn't help either. But here's the thing: strategists speaking with Yahoo Finance aren't sounding the alarm bells. They're calling this routine profit-taking, not the beginning of the end for artificial intelligence.

For investors who prefer ETFs over picking individual stocks, though, this shakeout is revealing something important about where the real opportunities might be hiding.

The Concentration Problem Catches Up

When you load up on the biggest names in AI, you get the upside when things go well. But you also get the downside when they don't. That's the lesson ETF investors learned last week.

The funds that got hit hardest were the ones you'd expect: Invesco QQQ Trust (QQQ) and Vanguard Information Technology Index Fund ETF (VGT) both have substantial positions in Nvidia, Microsoft Corp. (MSFT), Alphabet, Inc. (GOOGL), and Meta Platforms, Inc. (META). When those giants stumble, these ETFs stumble too.

Then there are the semiconductor specialists. iShares Semiconductor ETF (SOXX) and VanEck Semiconductor ETF (SMH) can have Nvidia accounting for more than 20% of their portfolios. That's a huge bet on one company, and when that company has a bad week, well, you do the math.

The numbers tell the story: QQQ dropped 5% over five days, VGT slipped more than 6%, SOXX slid 8%, and SMH lost over 7%.

Alex Morris, CEO and CIO at F/m Investments, explained it to Yahoo Finance in straightforward terms. With such heavy concentration in AI names, when those stocks start to wobble, "the average will naturally fall more than you might expect." It's just math.

The Case for Spreading Things Out

This is where equal-weight ETFs start looking interesting. Funds like Invesco S&P 500 Equal Weight ETF (RSP) and Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE) don't let the mega-caps dominate everything. Instead, they give smaller AI-adjacent companies in cloud computing, cybersecurity, and enterprise software a meaningful voice.

According to FactSet data, nine of the S&P 500's eleven sectors are showing earnings growth compared to last year. That suggests there's life beyond the handful of AI superstars everyone obsesses over. Equal-weight funds let you capture more of that broader strength without betting the farm on whether Nvidia has a good quarter.

The Second Wave: Software and Security Step Up

Jeff Krumpelman, chief investment strategist at Mariner Wealth Advisors, told Yahoo Finance that this pullback is actually highlighting opportunities investors have been ignoring. His team isn't backing away from AI—they're just looking for it in different places.

Specifically, Krumpelman sees value in software and cybersecurity stocks that have been beaten down while everyone chased semiconductors. AI isn't just about building better chips; it's about the applications, the infrastructure, and the security layer that makes all of it work.

That brings funds like iShares Expanded Tech-Software Sector ETF (IGV) into focus for software exposure. WisdomTree Cloud Computing Fund (WCLD) covers the cloud infrastructure angle. On the cybersecurity side, there's First Trust NASDAQ Cybersecurity ETF (CIBR) and Global X Cybersecurity ETF (BUG).

Take ServiceNow Inc. (NOW) as an example. The stock is down roughly 20% this year despite being deeply embedded in AI-driven enterprise software. For long-term investors, that's starting to look like a discount rather than a warning sign.

The Fundamentals Still Look Solid

Here's something worth remembering while everyone's freaking out about short-term volatility: earnings are actually doing just fine.

Barclays recently reported that S&P 500 net margins hit 14.2%—a 25-year high. FactSet notes that 82% of companies have beaten their earnings per share expectations, with blended third quarter earnings growth coming in at 13.1%. Those aren't the numbers you see in a market that's fundamentally broken.

All Eyes on Wednesday

Of course, none of this market philosophizing matters much if Nvidia's earnings disappoint when they report on November 19. For the ETFs with substantial NVDA exposure—SMH, SOXX, QQQ, and VGT—this earnings release could either validate the "don't panic" narrative or send things spiraling further.

The stakes are particularly high for semiconductor-focused funds given their outsized Nvidia positions. A strong report could quickly erase last week's losses. A weak one could accelerate the rotation into those software and cybersecurity names strategists have been talking about.

For now, though, the prevailing wisdom on Wall Street is that the long-term AI story remains intact. The technology isn't going anywhere, the applications are still being built out, and we're probably still in the early innings of this transformation.

For ETF investors, this dip might actually be the healthy correction they've been waiting for—a chance to reassess concentration risk, explore broader exposure, and maybe pick up some quality names that got unfairly dragged down in the selling. Sometimes the best opportunities show up when everyone else is heading for the exits.

    When Nvidia Sneezes, Does the Whole AI Market Catch a Cold? - MarketDash News