Equities: AI trade unwind weighs on tech – Danske Bank

Danske Bank’s Danske Research Team highlights that US equities saw a sharp AI-related selloff on Friday, with energy outperforming technology by more than 4 percentage points. The SOX index logged an eighth straight decline, its longest losing streak since 2006, underscoring concentrated weakness in AI names. Early Monday, sentiment looks more constructive with US futures, led by Nasdaq, trading higher.

AI-driven tech weakness contrasts firmer energy

"Friday's selloff during the US cash session reflected a further unwind of the AI trade, compounded by a rising oil price. Yet the headline indices masked a much more mixed market: most sectors and regions finished higher, while energy outperformed tech by more than 4pp on Friday alone."

"The SOX index nevertheless recorded its eighth consecutive decline, its longest losing streak since 2006, highlighting how heavily the recent weakness has been concentrated in the AI trade."

"Friday also brought the first clearer signs of broader risk aversion, with VIX rising towards 20. Sector performance reinforced that message. Consumer staples and discretionary have often moved together this year as inflation, energy prices and rates shaped the consumer outlook."

"On Friday, however, staples materially outperformed discretionary, a more conventional macro slowdown pattern. Sentiment is more constructive this morning. Although Asia and European futures retain some catch-up to Friday's US weakness, US futures are materially higher, led by Nasdaq."