Tech’s AI Hangover Goes Global: Nasdaq Rout Spills Into Asia as Valuations Face Reality Check

There are market corrections, and then there are moments when the entire narrative gets yanked out from under your feet. What started as a routine tech selloff has morphed into a full-blown AI hangover, with the Nasdaq suffering back-to-back losses of more than 1% for the first time since April and nearly $1 trillion in market cap vaporized in two trading sessions (youtube.com, 2026-02-05). But the real story isn’t just the scale of the drop, it’s the speed with which the AI euphoria has turned into a global risk-off contagion.

Traders who thought they could hide in software stocks or pivot to Asia got a rude awakening overnight. The tech rout that began in the US has now spread into Asian markets, with investors suddenly questioning whether AI spending is actually accretive, or just another expensive narrative. The CNN Money Fear and Greed Index is flashing “Fear,” and the Dow is diverging sharply from the Nasdaq, as old-economy names outperform while growth darlings get tossed out like last season’s sneakers (benzinga.com, 2026-02-05; seekingalpha.com, 2026-02-04).

Let’s talk numbers. The Nasdaq is down over 1% for two consecutive sessions, erasing weeks of gains. The Dow, meanwhile, is holding up, as defensive rotation takes center stage. Tech sector ETFs like XLK are frozen at $138.09, refusing to budge even as the underlying narrative unravels. Asian tech stocks have joined the party, with selling pressure intensifying as global investors rush to de-risk. The result is a synchronized risk-off move that’s hitting everything from US megacaps to Korean chipmakers.

But this isn’t just about price action. The underlying drivers are shifting. AI spending, once seen as the holy grail of growth, is now being scrutinized for its actual ROI. Investors are asking hard questions about whether the current multiples are justified, or if we’re simply replaying the dot-com bubble with better branding. Market concentration remains at historic highs, with the S&P 500’s market cap close to 200% of GDP (seekingalpha.com, 2026-02-04). When the top five stocks drive the entire index, it doesn’t take much to trigger a cascade.

Historically, tech corrections have been buying opportunities. But this time feels different. The divergence between the Dow and the Nasdaq is the widest it’s been in years, and the rotation into defensives is picking up steam. Macro volatility is back, and the days of easy money are over. With the Fed’s next move uncertain and China’s PMI data on deck, traders are bracing for more turbulence.

The cross-asset picture is just as chaotic. Commodities are flatlining (see DBC at $24.19), crypto is staging its usual drama, and bond yields are stuck in a holding pattern. The only thing moving is volatility, and it’s moving fast. This is a market that’s looking for leadership and finding none.

Strykr Watch

Technically, the Nasdaq is testing support at the 14,000 level, with resistance at 14,600. XLK is frozen at $138.09, with the 50-day moving average just below spot. RSI on tech ETFs is sliding into oversold territory, but there’s no sign of capitulation yet. The Dow is holding above its 200-day moving average, while the Nasdaq is flirting with a breakdown. Volatility metrics are spiking, with VIX up sharply over the past two sessions. This is a market on edge, and any further downside could trigger forced selling from CTAs and risk-parity funds.

The risk is clear: if the Nasdaq breaks below 14,000, the next stop is 13,500, and things could get ugly fast. On the flip side, a bounce here could trigger a vicious short squeeze, as positioning is now heavily skewed to the downside. The setup is binary, and traders need to be nimble.

The bear case is that AI spending disappoints, earnings miss, and the rotation out of tech accelerates. If the macro data comes in soft, or if the Fed signals it’s not ready to cut, tech could remain under pressure for weeks. But if sentiment turns, and we get a positive surprise from earnings or China, the rebound could be just as violent as the selloff.

For traders, the playbook is clear. Go short Nasdaq on a break below 14,000, with a stop at 14,300 and a target at 13,500. Or, if you’re contrarian, look for a reversal signal and ride the short squeeze back to 14,600. Either way, this is a market that rewards speed and punishes complacency.

Strykr Take

The AI narrative is cracking, and tech is no longer the safe haven it once was. This is a regime shift, not just a correction. Traders who adapt will thrive. Those who cling to old narratives will get steamrolled.

Strykr Pulse 38/100. Tech is in the penalty box, and the risk of further downside is high. Threat Level 4/5.