Jefferies Flags ‘Ultra High’ Tech Skepticism as Growth Darlings Hit a Sentiment Wall

If you want a snapshot of the mood in Big Tech, forget the price charts for a second and listen to the tone from the street. Jefferies’ Brent Thill, never one to sugarcoat, just called the skepticism and negativity around tech ‘ultra high’, and he’s not wrong. The AI-fueled euphoria that powered the sector through 2025 has hit a wall, and the market isn’t just pausing to catch its breath. It’s questioning the entire premise of growth at any price. Alphabet’s latest earnings report was the immediate catalyst, but the malaise runs deeper. Tech’s leadership is under siege, and the crowd that once bought every dip is now asking if the emperor has any clothes left.

The facts are plain. XLK, the tech sector ETF, is stuck at $137.14, flatlining in a way that feels less like consolidation and more like exhaustion. The Nasdaq 100 and S&P 500 are both wobbling, with tech stocks dragging the indices lower as AI spending fears and weak forecasts pile up. Brent Thill’s comments on CNBC’s ‘Squawk on the Street’ landed like a cold shower: ‘The amount of skepticism and negativity around tech is ultra high.’ Alphabet’s earnings didn’t help, with the company missing on key growth metrics and painting a picture of AI investments that may not pay off as soon as the market hoped. The layoffs and jobless claims in the sector are piling up, but as MarketWatch points out, the broader labor market is still tight. This isn’t a collapse, it’s a rotation, and it’s happening in real time.

Zoom out, and the context gets even more interesting. Tech has been the undisputed leader for years, but the cracks are showing. The bull market has broadened out, with utilities, energy, and industrials quietly outperforming as the AI narrative loses steam. The days of ‘tech or bust’ are over. Hedge funds are rotating into value and cyclicals, and the old playbook of buying every tech dip is looking tired. The skepticism isn’t just about valuations, it’s about the sustainability of growth in a world where AI is no longer the magic bullet. The JOLTS report, showing a downtick in job openings, adds another layer of uncertainty. If tech can’t deliver on growth, where does the leadership come from?

The analysis is simple but brutal. Tech’s leadership is being questioned, and for good reason. The sector is facing a triple whammy: AI spending is under scrutiny, earnings growth is slowing, and the labor market is sending mixed signals. The ETF flows tell the story, money is moving out of tech and into sectors that offer real cash flow and less hype. The skepticism Brent Thill is talking about isn’t just noise. It’s the market waking up to the fact that growth at any price is no longer a free lunch. The layoffs and jobless claims are a symptom of the same disease. When companies can’t justify headcount based on future growth, they cut. The market is calling their bluff.

The technicals are just as telling. XLK is stuck at $137.14, unable to break higher despite multiple attempts. The RSI is hovering around 50, signaling indecision. The volume profile shows a lack of conviction on both sides. This isn’t a market that wants to break out, it’s a market that’s waiting for a reason to care. The risk is that a break below $135 could trigger a wave of selling, as trapped longs look to cut their losses. On the upside, $140 is the level to watch. If tech can reclaim that level with volume, the narrative could shift. But for now, the path of least resistance is sideways to down.

Strykr Watch

The Strykr Watch on XLK are $135 as immediate support and $140 as resistance. A break below $135 opens the door to $130, while a move above $140 could spark a relief rally. The RSI is neutral, but the lack of volume on up days is a red flag. Watch for sector rotation flows, if utilities and industrials keep outperforming, tech could stay stuck in the mud. The options market is pricing in elevated volatility, with implieds running hotter than realized. That’s a sign that traders are hedging for a move, but they’re not sure which way it will break.

The broader market is watching the Nasdaq 100 for cues. If the index can’t hold its current levels, expect XLK to follow. The JOLTS data and jobless claims are a wild card. If the labor market weakens further, tech could come under more pressure. On the flip side, a positive surprise could provide the catalyst for a bounce. For now, the technicals favor caution.

The risks are clear. If AI spending disappoints further or earnings guidance is cut, tech could see another leg down. The ETF outflows are a warning sign, when institutional money leaves, retail usually follows. The labor market is a double-edged sword. If layoffs accelerate, the market could interpret it as a sign that growth is over. If jobless claims spike, the risk-off mood could spread.

The opportunity is in the rotation. If you believe that tech’s leadership is over, there’s money to be made in value and cyclicals. Utilities, energy, and industrials are already outperforming, and the flows suggest that trend could continue. For traders, the play is to fade tech rallies and buy dips in the sectors that are showing real strength. If XLK breaks below $135, look for short setups with tight stops. If it reclaims $140 with volume, be ready to pivot.

Strykr Take

Tech’s aura of invincibility is gone, at least for now. The skepticism is justified, and the market is rewarding sectors with real cash flow over hype. Stay nimble, watch the rotation, and don’t get married to the old playbook. Strykr Pulse 44/100. Threat Level 3/5. The opportunity is in the sectors that are quietly outperforming while everyone else is still arguing about AI.