The sell-off in U.S. stocks continued: The Nasdaq fell nearly 2%. What should investors do?

A sell-off resumed on the U.S. stock market on October 22. Tech stocks once again came under pressure, according to MarketWatch. Investors are reviewing the latest financial reports from Big Tech companies (Meta and Tesla released theirs the day before), trying to gauge the prospects for the AI rally, notes Bloomberg.

Against this backdrop, the S&P 500 lost 1% in the first few minutes of trading, the tech-heavy Nasdaq Composite fell 1.7%, the narrower Nasdaq 100 dropped 1.8%, and the blue-chip index fell 0.3%.

Semiconductor stocks came under pressure: the Philadelphia Semiconductor Index plummeted 5%. Meanwhile, the Roundhill Magnificent Seven ETF, whose portfolio includes shares of seven major tech companies—including Meta, Tesla, Nvidia, Apple, Amazon, Alphabet, and Microsoft— fell 2.5%. Meta shares were the worst performers in the fund’s portfolio. Following the release of its earnings report the previous day, the company’s credit risk indicator jumped to a new high: Meta’s spending plans sparked concerns that tech giants would issue even more debt into an already oversaturated market, according to Bloomberg. As a result, the social media giant’s stock plummeted 6.7%. This could mark its worst performance since late July.

Meanwhile, the price of U.S. Treasury bonds has risen: investors appear to be seeking “safe haven” in government bonds amid a sell-off in the stock market, according to MarketWatch. Thus, the yield on 10-year Treasury bonds fell to 5.033% on Thursday, marking the largest intraday drop in this metric since August 1, 2025 (when the yield on government bonds falls, their price rises, and vice versa).

Another negative factor for the market on Thursday was the rebound in oil prices, notes Bloomberg: Brent futures jumped above $112 per barrel due to growing investor concerns about the ongoing conflict in the Middle East.

"Investors should remain in the market to take advantage of further stock gains through broad diversification across sectors and regions," “and strengthen portfolio stability with bonds and commodities,” wrote Ulrike Hoffmann-Burkhardi, head of global equities at UBS, in a report, according to Bloomberg.

Strategists and portfolio managers at BlackRock, ClearBridge Investments, and Citi also offered advice to investors yesterday. To mitigate AI risks in their portfolios, they recommend focusing on dividend-paying stocks, bond ETFs, and gold.

A strategy based on opening a long position—for example, in semiconductor stocks and simply holding it for 12 months—given the sector’s recent performance—no longer works, notes Max Kettner, one of HSBC’s leading strategists. “[When it comes to chipmakers], you need to take profits and set very tight stop-losses (pre-set price levels at which the asset is automatically sold—Oninvest note),” he says. “You need to manage risk much more disciplinedly, rather than thinking: ‘This is a great fundamental story; I’ll buy for 12 months and just ride out the volatility,’” the expert noted, warning that “this volatility could easily result in a 15–20% drawdown.”

Brandon Dashill, a portfolio manager at Bogart Wealth, believes that the market is currently exhibiting “healthy skepticism” toward AI: “AI stocks are more vulnerable simply because their valuations are already very high. Therefore, any minor setback could trigger a sharp decline in some of these stocks,” he explained, noting, however, that against this backdrop, stocks are likely to remain volatile. But at Bogart Wealth, “they continue to view the market situation with cautious optimism,” Dashill added (as quoted by Reuters). According to LSEG, third-quarter earnings growth for S&P 500 companies is now forecast at 32.3%, up from the previous estimate of 30.7%, the agency notes.

This article is being updated

This article was AI-translated and verified by a human editor