High-beta momentum stocks are experiencing their most severe pullback since the financial crisis. Goldman Sachs' US High Beta Momentum Index shows the index may fall by about 23% this month, approaching its worst monthly performance since the 2008 financial crisis. Data in the chart shows that the current decline has significantly exceeded most past risk-release phases, second only to the extreme market conditions of 2008.
This correction is not affecting the entire technology sector, but is concentrated in AI-related stocks, which previously saw the largest gains and were the most heavily invested in. Highly volatile stocks such as Nvidia, AMD, Palantir, and some quantum computing and semiconductor concept stocks are all areas where the market has been highly focused.
The market is reassessing the logic behind AI capital expenditure: Over the past year, investors traded on the "unlimited growth in AI demand," but with the continued investment from hyperscale cloud providers, the market is beginning to focus on whether these infrastructure investments can translate into sufficient returns. If the speed of computing power construction exceeds actual commercial demand, the stocks with the highest valuations and most fully priced-in expectations will often be the first to feel the pressure.
