Wall Street’s Leadership Test, the Risks for AI and the Nasdaq 100 Correction

Lale Akoner, global markets analyst at etoro, presents the new weekly analysis titled “Wall Street’s leadership test”.

In this edition, Akoner examines the shift in sector leadership in the US stock market, the implications of the midterm elections for investment in AI and data centers, the Nasdaq 100 correction, the performance of Siemens Energy and the outlook for bitcoin and ethereum.

Wall Street’s leadership test

Markets are becoming more volatile, but the weakness is not uniform. Big Tech is losing momentum, while healthcare, financials and some consumer segments are showing resilience. For investors, the question is whether these new leaders can withstand a broader decline.

Selling pressure intensifies

Thursday saw a broad-based pullback: roughly seven stocks fell for every one that rose, the worst reading since October 2025. Investors also increased their demand for protection against further losses.

Nervousness alone does not indicate that a bottom has been reached. Sentiment has cooled, but the weakening trends in the S&P 500 and the Nasdaq 100 suggest that a rebound would need more evidence to support it.

The average stock is holding up better

Size matters. The equal-weighted S&P 500, which gives each company the same influence, is holding up better than the tech-heavy Nasdaq 100. Through October, it outperformed the traditional S&P 500 by 3.2%.

Why it matters: market returns could depend less on a handful of giants. Historically, this kind of relative strength has often continued over the following year, although outperforming the market can also mean losing less in a bear market.

Healthcare takes the lead

The gap is striking: 90% of healthcare stocks in the S&P 500 were trading above their average price over the last 200 sessions, compared with just 37% of tech stocks.

Financials are also improving, as are consumer stocks, and they are showing encouraging momentum, although their longer-term trends still need to firm up.

Energy hits turbulence

Another weak spot: refiners have fallen rapidly by around 20% from their highs, while smaller energy companies are also struggling. The recent weakness calls into question energy’s place among the market’s strongest sectors.

Investment takeaway: use leadership shifts to review concentration. An equal-weighted approach can spread exposure beyond the largest tech companies, while healthcare’s resilience and the improvement in financials deserve closer attention. Consumer stocks need more confirmation and energy weakness calls for selectivity. It is worth distinguishing between relative strength and protection: the sectors holding up best can also fall in a broad sell-off. Favour companies with reliable cash generation, manageable debt and reasonable valuations. Rebalance gradually, leaving room to add to positions if broader market strength takes hold, rather than reading the first rebound as confirmation that the correction is over.

US midterm election results: implications for investors

The US midterm legislative elections could bring major changes for data centers, healthcare, defense and fiscal policy. A divided Congress may make it harder to pass major legislation, but state-level changes and negotiations over public spending could still have significant effects on certain sectors.

Data centers: political risks are not fully priced in

The political environment is becoming less favourable to data center development. Both Democrats and Republicans are increasingly questioning new projects, especially at the state level.

Texas: around 25% of the US pipeline of data center projects under development is tied to this state. A proposed moratorium on new projects could put a significant share of planned capacity at risk.

Georgia and Ohio: new governors could introduce higher taxes and stricter restrictions on data center construction.

Federal policy: Democrats could push to eliminate a tax advantage that allows data center companies to immediately deduct their investment costs, making new projects more expensive.

What it means for investors: higher taxes, fewer tax benefits and stricter building rules could make new data centers more expensive to build and reduce their profitability.

The share prices of data center-related companies have already reflected some of these concerns since July, but the risks may not be fully priced in.

We believe the impact could vary across companies. Restrictions on new data centers could increase the value of existing computing capacity and potentially benefit hyperscalers such as Microsoft, Amazon and Alphabet, which already operate large data center networks. By contrast, developers such as IREN, Applied Digital and Hut 8 could face delays and higher costs when building new facilities. Chipmakers such as Nvidia and AMD, and electrical and cooling equipment suppliers such as Vertiv and Eaton, could also face slower demand if fewer data centers are built.

The key distinction is between companies that already have computing capacity and those that depend on building new data centers.

Healthcare: more regulation, but major changes may be difficult

Healthcare is likely to be one of the Democrats’ top priorities. They are expected to focus on protecting Medicaid funding and restoring the Affordable Care Act subsidies, which help people pay for their health insurance.

At the same time, proposals to lower drug prices and introduce stricter rules for Medicare Advantage are likely to return.

What it means for investors:

Hospitals: protecting health coverage could translate into more insured patients and fewer unpaid medical bills, supporting hospital finances.

Health insurers: companies with a significant presence in Medicare Advantage could come under pressure from stricter rules and possible payment changes.

Pharmaceuticals: new efforts to lower drug prices could pressure earnings and share prices.

Many of these proposals may never become law. However, the mere prospect of tougher regulation could weigh on investor sentiment.

The key is that healthcare should not be treated as a single sector. Hospitals could benefit from greater insurance coverage, while insurers and pharmaceutical companies face different risks.

Defense: increasing spending could be harder than expected

The Administration is likely to pressure Republicans to raise the debt ceiling and approve higher defense spending before the Democrats take office.

However, reaching an agreement could prove difficult.

What it means for investors: defense companies have benefited from expectations of higher military spending, but those increases could take longer than expected to materialise.

This does not necessarily mean defense budgets will decline. The main risk is that spending grows more slowly than investors anticipate.

Companies that depend on new government contracts could be more exposed to delays, while those with established, long-term contracts could be better protected.

Fiscal policy: greater political gridlock

A divided Congress could complicate negotiations over public borrowing, spending and taxes.

The debt ceiling could become an important bargaining tool, and Democrats could demand changes to tax benefits in exchange for supporting an increase.

What it means for investors: the impact could be greater on specific sectors than on the stock market as a whole.

Companies heavily dependent on tax incentives or public spending could face greater uncertainty. Data centers are one example, given the possible elimination of their upfront tax deductions.

Even if the proposed changes are never approved, the uncertainty could make companies more cautious about committing to large investments.

The potential market surprise: AI growth faces political obstacles

For much of the past year, investors have wondered whether companies are spending too much on artificial intelligence and whether those investments will generate sufficient returns.

Now a different risk is emerging: what would happen if companies wanted to build more AI infrastructure but ran into growing political obstacles?

Higher taxes, construction restrictions and permitting delays could slow data center development, even if AI demand keeps growing.

This could create divergences within the sector.

Companies that already operate data centers, have access to electricity and hold the necessary permits could find themselves in a stronger position. Developers that still need to build large amounts of new capacity could face higher costs and delays.

However, existing operators would not be completely protected either, especially if higher taxes and operating costs affect the entire industry.

The investment question is whether markets have fully priced in the possibility that political constraints, rather than weak demand, could be what slows the growth of AI infrastructure.

Key investment takeaways

The elections could bring different risks and opportunities depending on the sector.

Data centers: higher taxes and stricter development rules could put additional pressure on stocks, with some risks not yet fully priced in.

Healthcare: hospitals could benefit from efforts to protect insurance coverage, while pharmaceutical companies and Medicare Advantage insurers face the prospect of tougher regulation.

Defense: the increase in military spending could take longer to arrive, posing a risk for companies where expectations are already high.

Fiscal policy: debt ceiling negotiations could create uncertainty over public spending and existing tax benefits.

The broader investment takeaway is that policy changes do not need to become law to affect markets. The prospect of higher costs, stricter regulation or spending delays can influence companies’ investment plans and their share prices long before a final decision is made.

For investors, the important question is which risks are already reflected in valuations and where there could still be room for disappointment.

The Nasdaq 100 enters correction territory: buying opportunity or warning sign?

The Nasdaq 100 fell 5.5% last week to around 26,900 points and closed below its 50-week moving average, located at 27,480 points.

A weekly close below the 50-week moving average is particularly important for two reasons. First, it happens relatively rarely. Second, similar situations in recent years have often created attractive entry opportunities. The question now is how long the index will remain below that average.

The chart shows that the duration can vary considerably, as illustrated by the purple rectangles. After the 2020 coronavirus crash and Trump’s tariff announcements in 2025, the Nasdaq 100 recovered relatively quickly and resumed its uptrend. However, in 2022 the index stayed below the 50-week moving average for longer during a gradual sell-off that unfolded in several waves.

Investors should therefore watch for reversal signals. A move back above the July low, around 27,060 points, followed by a recovery of the 50-week moving average, could help stabilise the market. Until that happens, the risk of further declines persists.

The Nasdaq 100 is currently around 14% below its all-time high and is therefore officially in correction territory. The most important support level is the double top formed in January at 26,250 points. This zone was already tested last week. If it fails to hold, the next major level is much lower, at the March low of around 22,800 points.

Could third-quarter results drive a trend reversal at Siemens Energy?

Siemens Energy will report its third-quarter results on Wednesday. After the recent market turbulence, the stock has become a test of the resilience of major themes such as infrastructure, AI and geopolitics.

The correction in US tech stocks was driven by concerns that companies could scale back their massive infrastructure investments as AI returns take longer to materialise. Siemens Energy supplies transformers and power grid technology for data centers, making it a supplier positioned at one of the main bottlenecks of the AI boom.

Following the Democrats’ election victory, local moratoriums on data center construction pose a risk in the United States. During the earnings presentation, investors should listen closely for any sign of delays in major US projects. Persistently high bond yields are also relevant. Siemens Energy’s customers, including grid operators, utilities and wind developers, typically finance multibillion-dollar projects over many years. Higher financing costs could slow them down.

The stock fell 6.4% last week to €118.40 and briefly reached €110.90, its lowest level in about a year. It now stands almost 40% below its all-time high.

The technical picture therefore remains strained. The 20-week moving average has crossed below the 50-week one. However, these signals tend to lag. The persistence of the downtrend structure is therefore more important.

If the stock keeps falling, the next supports are at €100 and €94. These levels mark higher lows of the 2025 uptrend. To signal a trend reversal, Siemens Energy would first need to break above the €138 high. The stock tested that level several times during the year and initially held it as support, but eventually fell below it in October. The question now is whether buyers can regain control at that level.

Bitcoin and ethereum in a less liquid market

Our base case for the coming weeks is that bitcoin continues to consolidate. However, we see a greater risk of another bearish phase than of a sustained recovery.

Spot bitcoin ETFs ended the week with net outflows of $1.28 billion. Stablecoin market capitalisation also fell 2.2% over seven days, pointing to potentially lower liquidity in the crypto market. If both trends persist, it will be harder to sustain a rebound.

On November 4, only 38% of bitcoin held by short-term holders was in profit. On Friday, coins from that group that moved on-chain did so, in aggregate, at a slight loss. If the price returns to their entry levels, some recent buyers could take the opportunity to exit, stalling the rebound. We would look for the rally to hold, for a larger share of those coins to return to profit and for ETF outflows to ease.

In the case of ethereum, the question is whether ETH can regain ground against BTC. If bitcoin rebounds and ETH lags behind, the recovery will remain concentrated in bitcoin. If ETH outperforms over several sessions and other liquid crypto assets follow, that would point to a broader recovery. In the longer term, fund tokenization is expanding institutional use of ethereum. Its impact will depend on how much capital is managed through the network and how much activity it generates.

Over the next two to four weeks, we estimate a 50% probability of consolidation, with flows stabilising and recent buyers near breakeven. We assign a 30% probability to a deeper decline if ETF redemptions persist and realised on-chain losses increase. The remaining 20% corresponds to a firmer recovery, with better flows, more short-term positions back in profit and ETH regaining ground against BTC.

The next US inflation report could move the dollar and bond yields. We will watch what happens in the following sessions. If the rebound holds and flows improve, we will give more weight to the recovery scenario. If prices rise while outflows continue, we will remain cautious.

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