Nasdaq 100 jumps 9.3% in four days, adding $3.5 trillion

A $3.5 trillion market-cap surge in four sessions has erased the Nasdaq 100's correction, powered by blowout AI earnings.

The Nasdaq 100 jumped 9.3% in four sessions, adding $3.5 trillion to its market value, the sharpest rally since April 2025.

"The days where you could short the capex spenders, that is the hyperscalers, and go long the capex receivers are over," said David Rainville, lead manager of Sycomore Sustainable Tech fund. "It's not a binary trade anymore."

The bounce was broad, with semiconductors, software and hyperscalers all rallying. SanDisk surged 41%, Palantir Technologies jumped 32%, Microsoft gained 26%, while Alphabet and Nvidia each rose 11%. Blowout second-quarter results have reassured investors that massive AI outlays are paying off for major players.

The reversal from an 11% monthly decline into a technical correction to a 9.3% four-day rally shows how quickly positioning can shift in AI-linked equities. Deutsche Bank strategists see the rotation into tech having further to go, with a typical outperformance of 20 percentage points.

Last month's heavy deleveraging, which drove the correction, means fast-money actors like hedge funds have covered many short positions and are now back to buying the sector. According to Goldman Sachs Group Prime Brokerage data, hedge funds added information technology sector stocks at the fastest pace since December 2022 last week. The Magnificent Seven were collectively purchased, but overall exposure remains subdued, leaving scope to build positions further.

Technology stocks have delivered earnings beats 90% of the time against a high bar this reporting season, according to a Bloomberg Intelligence tracker, while analysts have kept raising estimates.

Divergence Widens Among AI Winners

The latest earnings cycle has served up striking divergence among technology leaders, with investors rewarding companies showing tangible AI revenue while penalising those with less visible payoffs. Between the market closes of July 29 and Aug 4, Nebius Group surged 52%, while Apple fell 8.5%, creating a 61 percentage-point spread between the best and worst performers in a broad AI-linked technology universe.

"What's new in the AI trade is that there's a lot of dispersion within semiconductors or hyperscalers," said Roland Kaloyan, strategist at Societe Generale. "That means clients such as equity portfolio managers who can't invest in indexes have challenging stock picking choices to make."

For Deutsche Bank strategists including Parag Thatte, rotation out of megacap technology stocks bottomed out last week. Positioning on the group has since bounced modestly, leaving room for more gains. Within the sector, they see the best risk-reward in the hyperscalers, whose relative performance to the S&P 500 is just off the worst levels of a three-year range.

"We see the rotation into tech having further to go with a typical outperformance of 20 percentage points," they said. "This would be the fifth such rotation in the last three years with the market focus repeatedly swinging between stellar growth and bubble fears at an increasing rate."

The rapid snap-back from correction to rally within weeks could also signal elevated volatility and positioning-driven swings. If earnings momentum disappoints in coming quarters, the same fast-money flows that powered this rebound could reverse just as quickly.

This article is for informational purposes only and does not constitute investment advice.