A More Selective Market, by Lale Akoner

Lale Akoner, Global Markets Analyst at etoro, takes the pulse in her weekly analysis of how Big Tech’s spending spree is testing investors’ patience. The Nasdaq 100 briefly entered correction territory as doubts grew over when investment in artificial intelligence (AI) would translate into cash generation. Meanwhile, gains in the healthcare and energy sectors suggest the sell-off is also making room for new market leaders.

A more selective market

Alphabet’s negative quarterly free cash flow, Amazon’s higher-than-expected spending and Intel’s disappointing outlook helped trigger the recent tech slide. Investors are questioning how quickly AI spending will pay off, while concerns about chip demand and supply constraints persist.

Microsoft’s strong cloud growth offered a more favourable picture and pointed to demand for AI services remaining robust. But sales growth alone is no longer enough: investors want to see how much cash is left after paying the infrastructure bill.

How companies finance that spending is also under scrutiny in an environment of higher cost of capital. More borrowing adds interest expense, while issuing shares can dilute existing shareholders’ stakes, adding pressure on already uneasy equity investors.

The next dividing line could fall between companies able to fund their expansion with the cash they generate and those increasingly reliant on raising new capital.

Rotation is under way, but it has yet to prove its strength

Equal-weighted equities remain below their highs. Even so, gains in healthcare and energy, improving trends in insurance and the resilience of certain industrial companies point to opportunities beyond the largest tech stocks.

Healthcare and energy stand out most clearly in recent sector performance. The breadth of the rally in healthcare is especially strong: around 88% of its constituents are trading above their 200-day moving average.

Correlations between stocks also remain relatively low. A broad sell-off usually drives correlations higher as investors sell across sectors. That signal does not yet confirm a mass exodus, although correlations move slowly.

The next test will be whether these emerging leaders hold on to their gains when tech comes under pressure again.

Which sectors can withstand higher interest rates?

Healthcare, including big pharma names such as Eli Lilly and Gilead Sciences, benefits from essential demand and growth driven by new treatments. Financially sound companies should be preferred: heavily indebted healthcare providers have less protection against costlier financing.

Banks could benefit if loan income rises faster than the interest paid to depositors. Lenders with stable, low-cost deposits look better positioned, provided higher rates do not cause a sharp slowdown and rising credit losses.

Energy offers opportunities among financially strong oil and gas companies such as ExxonMobil and Chevron, which can fund their investments from their own cash flow. More caution is warranted with refiners, following strong share price gains and signs of weakening refining margins.

Payment services and certain software companies, such as Visa, Mastercard and Palo Alto Networks, offer another avenue. Payment networks benefit from ongoing transaction activity, while cybersecurity firms provide protection that customers find hard to do without. Their businesses depend less directly on rate cuts, although their stock valuations remain sensitive to bond yields.

These are starting points for stock selection, not blanket recommendations on entire sectors.

Weaker borrowers are starting to show strain

Around 10.7% of leveraged loans in the tech sector are trading at distressed levels, compared with roughly 5% for the broader loan index. The share of distressed tech loans exceeds that recorded during the COVID-19 pandemic.

Financing for some data centre projects is becoming more expensive as lenders demand greater compensation for risk. The pressure is especially concerning for borrowers that rely on continued access to debt to fund their expansion.

The danger is that financial strain begins to constrain investment and then spreads to suppliers and employment.

Earnings are the cushion

Recent earnings growth of close to 30% makes it hard to take an outright bearish stance. The Federal Reserve held interest rates and the 10-year bond yield stands near 4.93%.

High bond yields can remain manageable as long as earnings keep pace. The most dangerous combination would be expensive financing alongside falling earnings expectations.

Takeaway for portfolios: keep a longer horizon than the headlines

Pullbacks are part of investing, but they can expose risks that rising prices had made easy to overlook. Use this correction to review concentration and ask which companies can keep meeting their targets if financing remains expensive.

The goal is to own companies you can hold through uncertainty because their financial position and earnings support the investment conviction. A lower share price helps; a business capable of funding its own future matters more.

All show and weak numbers? Tesla needs to deliver results

The spectacular unveiling of the new Tesla Roadster 2, with SpaceX thrusters, has grabbed big headlines. However, ahead of Tesla’s quarterly results on Wednesday after the market close, the event could also serve as a distraction. Other factors will matter more.

What Tesla investors should watch

• Vehicle deliveries and revenue.
• Margins amid inflation and price competition.
• Progress in autonomous driving and robotics.
• Consumer confidence as an indicator of demand.
• Free cash flow after the billions invested in AI data centres.

Analysts expect revenue of around $27.8 billion. Earnings per share are forecast to fall to around $0.44-0.45. The key question is how much cash Tesla actually generates after its heavy capital spending.

The technical recovery at risk

Tesla shares fell 7.3% last week to $355 and slipped back below their 20-week moving average, around $366. They are still trading roughly 20% above the July low. Previously, the stock had formed an ABC correction after hitting an all-time high of $496 in December 2025.

For the chart to improve on a sustained basis, Tesla must clear several resistance levels. It first needs to reclaim the 20-week moving average and then the 50-week average at $396. Above that, a major resistance zone awaits around $410.

In the short term, the risk of another drop towards the July low has increased. Buyers need more confirmation before a medium-term trend reversal can be discussed.

SpaceX will also report its results on Tuesday after the US market close.

Credit markets are starting to get nervous

The option-adjusted spread (OAS) on US high-yield debt measures the additional interest premium investors demand for low-quality US corporate bonds over US Treasuries. A narrow spread indicates limited concern about risk; a wider one signals greater fears about defaults, financing and the economy.

The spread currently stands at around 3.2 percentage points, compared with roughly 2.6 points at the end of August. This level is not yet alarming from a long-term historical perspective. However, the sharp rise shows that credit markets are becoming more cautious.

Widening spreads make financing more expensive for capital-intensive companies. This particularly affects data centre expansion, chip production and other areas of AI infrastructure. Higher financing costs can weigh on investment, margins and expected earnings.

The credit market is therefore becoming an important stress test for the AI investment thesis. Strong revenue growth is not enough if financing that growth becomes too expensive or difficult.

A significant widening of the spread would indicate lower risk appetite and higher default risk. A level of 4% or above would be a much stronger warning signal, although it would not automatically mark a crisis threshold. Investors should therefore analyse it alongside bond yields, credit default swaps (CDS), banks and company guidance.

A further rise could hurt richly valued tech stocks in particular. Heavily indebted companies, those with weak cash flow or large investment needs would be especially vulnerable. By contrast, a stabilisation of the spread would bring short-term relief to equity markets.

For long-term investors, the key question is whether the widening spread remains a normal repricing of risk or evolves into broader credit stress.

Bitcoin’s resilience deserves attention, although ETF outflows continue

A major hack of a centralised platform has added uncertainty to an already weakened market. However, bitcoin’s initial reaction has been relatively muted given the scale of the incident.

So far, the episode appears more contained than previous industry collapses, which spread through interconnected lenders, platforms and counterparties. That assessment remains provisional. Restoring withdrawals and providing credible information on reserves will be important.

The market’s ability to absorb bad news is encouraging. The next test will be whether that resilience lasts.

Bitcoin is trading around $77,300, down 7.6% in October. Ethereum stands near $2,240, down 16.4%.

Four key points for investors

• ETF outflows remain significant
• On Friday, bitcoin ETFs recorded net outflows of $643 million, while ethereum ETFs lost $155 million. ETH ETF outflows in October exceed $1 billion.
• These figures make bitcoin’s relatively muted reaction worth watching. The coming sessions will show whether redemptions ease or keep pressuring prices.
• Recent buyers are close to their cost basis

The estimated cost basis of short-term holders stands at around $75,900. This on-chain metric includes coins last moved within the past 155 days and approximates their acquisition price.

With BTC near $77,300, this group’s aggregate unrealised gain is barely 2%. A sustained drop below that benchmark would put recent holders as a whole into unrealised losses and could increase selling pressure.

The $76,000 zone is therefore an important test of recent holders’ conviction, not a guaranteed floor.

Leverage has declined, but risks remain

Liquidations reached $1.57 billion, while open interest fell 3% to $136.3 billion. Some exposure has been flushed out, although BTC funding rates remain positive.

Longs are still paying shorts. This does not predict a decline, but another breakdown could trigger further long liquidations.

The $76,300 zone is the immediate technical reference, close to the short-term holder cost basis. On the upside, $78,670 is the first level that must be reclaimed and held.

Ethereum has yet to show the same relative strength

The ETH/BTC pair has fallen from 0.0319 in early October to around 0.029. Ethereum keeps losing ground against bitcoin while its ETFs see redemptions.

Tokenisation and new applications may support its long-term potential, but this has not yet translated into stronger relative performance.

Bitcoin has so far absorbed a serious security incident without a proportional price collapse. That is useful information. Holding near recent holders’ cost basis, avoiding wider contagion and seeing ETF outflows ease would give that resilience a firmer footing.

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