S&P 500 Enters Downtrend Amid AI Spending Concerns

The S&P 500 has entered a technical downtrend following the midterms, falling 6% below its October all-time high. The index has broken key supports and is now targeting the 7237 level. This decline follows a shift in October where investors rotated away from technology stocks toward defensive and value assets.

Market volatility is driven by concerns over the durability of the artificial intelligence capital spending cycle. The Goldman Sachs Group reports that 45% of planned US data center capacity is affected by uncertainties and delays that are expected to persist for several months. Analysts warn that a material slowing of AI expenditures, combined with tighter credit conditions and post-midterm policy uncertainty, could trigger a broader unwinding of technology valuations and increase recession risks.

Some indicators suggest potential support for equities. The Nasdaq forward P/E ratio has fallen below 19, which some view as an attractive valuation. Additionally, record corporate buyback authorizations totaling $166 billion in October and positive post-midterm seasonality may mitigate selling pressure if sentiment stabilizes.