Nasdaq’s Rotation Hangover: Tech’s Lost Mojo, Hardware’s Rise, and the Search for New Leadership

If you’re looking for the pulse of risk appetite in 2026, you could do worse than staring at the Nasdaq’s flatline. The index closed at $23,255.91, dead even, a number that feels less like a price and more like a market-wide existential shrug. For a generation of traders raised on the gospel of tech outperformance, the past week has been a rude awakening. The rotation out of software and into hardware, value, and anything not trading at 15x sales has left growth bulls stranded, while the old playbook of ‘buy every dip in SaaS’ is suddenly about as useful as a 2021 SPAC prospectus.

Let’s not pretend this is just a blip. The headlines are relentless: ‘Hardware Flies, Software Dies’ (Seeking Alpha), ‘AI Disruption Fears Rock Software Stocks’ (CNBC), and Jim Cramer, never one to miss a trend, declaring that investors are paying less and less for software earnings (YouTube). The proximate cause? A new Anthropic AI tool that has investors convinced the entire software-as-a-service sector is about to be eaten by its own children (WSJ). The result: software stocks are getting slammed, with no floor in sight. Meanwhile, hardware is having a moment, as investors rotate into anything with a supply chain and a tangible product.

The numbers tell the story. The Nasdaq is stuck at $23,255.91, unchanged, but under the surface, sector dispersion is at decade highs. Tech benchmarks are diverging, with traditional sectors seeing inflows after years of tech dominance (Seeking Alpha). The S&P 500 is also flat at $6,918.68, but the rotation out of growth and into value is unmistakable. The days of indiscriminate tech buying are over, at least for now.

The macro backdrop is doing the market no favors. US stock futures are steady, but the mood is cautious as traders eye ISM services data, Fed signals, and a parade of earnings reports (FXEmpire). The yen’s weakness may have provided a brief lift in Asia, but nobody’s mistaking this for a risk-on rally. The resignation of Fed governor Stephen Miran from his White House post (WSJ, CNBC) adds a layer of uncertainty, while the Senate Banking Committee drama over Kevin Warsh’s nomination injects even more volatility into the central bank narrative (CNBC).

What’s different this time is the nature of the rotation. In previous cycles, tech selloffs were often met with a wall of dip-buying. Now, the money is flowing into hardware, industrials, and even some battered value names. The AI trade has flipped: investors are no longer chasing every SaaS name with a chatbot, but are instead looking for companies that actually make things. This is not just a tactical rotation. It’s a fundamental rethink of what constitutes ‘AI exposure’ and where the next leg of growth will come from.

The historical parallels are instructive. The last time we saw this kind of sector dispersion was in the aftermath of the dot-com bust, when capital rotated out of unprofitable tech and into old-economy stalwarts. The difference now is that the tech sector is far more entrenched, with cloud, AI, and software woven into the fabric of the global economy. But that doesn’t mean valuations can’t compress, especially when the narrative shifts from ‘growth at any price’ to ‘show me the money’.

Technically, the Nasdaq is at a crossroads. The $23,255.91 level is both a psychological and technical pivot. Momentum indicators are neutral, with RSI hovering in the mid-50s and MACD flatlining. The index is stuck between its 50-day and 200-day moving averages, with no clear trend in sight. The lack of direction is itself a signal: the market is waiting for a catalyst, whether it’s a blowout earnings report, a dovish Fed pivot, or a macro shock that forces a repricing of risk.

Under the hood, the story is one of dispersion and rotation. Hardware names are outperforming, with chipmakers, device manufacturers, and even some old-school industrials seeing inflows. Software, on the other hand, is in the doghouse, with SaaS multiples compressing and growth narratives being challenged. The ETF flows tell the story: money is moving out of tech-heavy funds and into sector ETFs with more exposure to cyclicals and value.

The risk for traders is getting caught on the wrong side of the rotation. The temptation to buy the dip in tech is strong, but the market is punishing those who move too early. The pain trade is still to the downside for software, while hardware and value are the beneficiaries of the current regime shift. The opportunity is in being selective: not all tech is created equal, and the winners will be those with real earnings, tangible products, and exposure to the right macro trends.

Strykr Watch

The key level for the Nasdaq is $23,255.91. A sustained break above $23,500 would signal a return of risk appetite and could trigger a squeeze higher, with the next target at $24,000. On the downside, watch for support at $22,750, which coincides with the 50-day moving average. Below that, the $22,000 level is critical, as it marks the bottom of the recent range and the line in the sand for bulls.

Momentum indicators are mixed. RSI is neutral, but stalling. MACD is flat. The lack of conviction is itself a warning sign: the market is waiting for a catalyst, and when it comes, the move could be sharp. Sector dispersion is at decade highs, so watch for signs of rotation in ETF flows and relative strength charts. Hardware and value are in favor, while software is under pressure. The pain trade is still to the downside for growth, so keep stops tight if you’re trying to catch a falling knife.

The risks are clear. A hawkish Fed, a weak ISM print, or a disappointing earnings season could trigger a broader risk-off move and take the Nasdaq below $22,750 in a hurry. The rotation out of tech could accelerate, with software and growth names bearing the brunt. The political drama around the Fed, with Miran’s resignation and the Warsh nomination fight, adds another layer of uncertainty. The market is on edge, and the next move will be decisive.

But there are opportunities. A clean break above $23,500 could trigger a squeeze higher, with hardware and value names leading the charge. For the patient, a dip to $22,000 is worth watching for signs of accumulation by institutions. The rotation trade is alive and well, so look for relative strength in hardware, industrials, and select value names. The days of indiscriminate tech buying are over, but the winners of the next cycle are being chosen now.

Strykr Take

This is a market in transition, and the old playbook no longer works. The rotation out of software and into hardware, value, and cyclicals is real, and traders need to adapt or risk getting left behind. The Nasdaq is stuck in a holding pattern, but the next move will be decisive. Stay nimble, watch the flows, and don’t be afraid to rotate with the market. The new leadership is emerging, and the winners will be those who can spot the trend before the crowd. Strykr Pulse 54/100. Threat Level 3/5.

datePublished: 2026-02-04 04:00 UTC