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Deflating the AI and Trump Bump

Another day, another $1.4 trillion wipeout. 

On Monday, the Nasdaq suffered its worst single-day drop since 2022, dropping 4% as the Magnificent Seven seemed to collapsed under its own weight.

In the last 13 trading sessions, the index has shed 12.4% — eerily close to the losses from the first 13 days of the COVID crash in 2020.

And since history tends to rhyme, it’s only fitting that this arrived almost exactly 25 years after the dot-com bubble peaked, when the same tech-heavy index skyrocketed 500% in five years. 

Wall Street is waking up to the downside of its own overconfidence — in AI, Trump, and momentum.

Investors had spent months bidding up the biggest names in tech, but now the air is rushing out. Notably, the stocks that surged in the first months following President Trump's re-election in November are now the ones getting hit the hardest.

Since the S&P 500’s peak on February 19, the 100 best-performing stocks from election day through that high are now down an average of 19.7%, according to data from Bespoke Investment Group.

Meanwhile, the 100 worst performers from that post-election rally are down just 1.4%.

In effect, the same stocks that rode the Trump-fueled optimism are now leading the market lower.

Why are investors nervous now? In an interview with Fox News this weekend, Trump didn’t exactly rule out a recession. Plus, he doubled down on his tariff strategy. 

Wall Street had initially bet that Trump 2.0 would bring pro-business and pro-growth policies. But markets have instead dealt with higher uncertainty than expected from tariffs. 

The Magnificent Seven, which fueled most of the gains in 2023 and 2024, shed about $760 billion in market cap on Monday alone. Roundhill’s Magnificent Seven ETF has entered a bear market, down 20% from its December highs.

Even beyond tech, Monday’s action had all the hallmarks of a market in distress. The CBOE Volatility Index — dubbed Wall Street’s fear gauge — spiked to 28.

And bitcoin, which had surged past $109,000 shortly after the election, tumbled below $75,000.

The speed of this reversal is a sober reminder of how quickly sentiment can turn. Wall Street was convinced that stocks tied to AI were unstoppable and that Trump’s pro-business administration could only push stocks higher.  

Some investors are waking up today bruised from an old lesson: What goes up fastest tends to come down just as hard.

Market snapshot

Elsewhere:

📉Bitcoin and other cryptocurrencies keep falling. Despite the White House announcing the strategic bitcoin reserve and other digital asset initiatives, the crypto market continues to move lower. President Trump’s pro-crypto stance, for now, isn’t yet pushing asset prices higher. (Yahoo Finance)

🚘️ Tesla stock dropped over 15%. Even with Elon Musk in the White House running DOGE, his car company has wiped out its post-election gains. Monday marked the stock’s worst day since September 2020, and UBS strategists lowered their price target from $259 to $225 for Tesla. (CNBC)

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About me:

📰 I’m Phil Rosen, co-founder and editor-in-chief of Opening Bell Daily. I’ve published books, lived on three continents, and won awards for my journalism, which has appeared in Business Insider, Fortune, Yahoo Finance, Bloomberg and Inc. Magazine.

I write our flagship newsletter to prepare you for each trading day, unpacking markets, economic data and Wall Street with analysis you won’t find anywhere else. Feedback? Reply to this email, ping me on X @philrosenn, or write me directly at phil@openingbellmedia.com.