Markets are rebounding following Thursday’s declines. Bitcoin has jumped $5,000, boosting sentiment in the tech sector, and the S&P 500 is up by more than 1%. However, Amazon is struggling with a 9% drop due to a disappointing earnings report and its large spending plans. Even though tech companies are reporting strong results—35 S&P 500 firms noted an average sales growth of 16% and earnings growth of 24%—the benefits of AI investments are still unclear. Major tech firms like Meta and Google primarily earn from advertising, not AI. Currently, the return on capital for significant AI investors is low, making future prospects uncertain.

Changes in Tech Giants

The Magnificent 7 tech group is shifting, with Apple rising alongside Nvidia because of hyperscaler spending plans. Apple’s stock surged nearly 10% this week. Concerns linger about the structural challenges facing AI-related stocks, which may impact their performance. In commodities, silver’s recent selloff shows market anxiety, while gold is viewed as a safer alternative, rising over 1% this week. The market is now more focused on company valuations as geopolitical risks lessen with new US-Iran talks. Risky assets like tech stocks and Bitcoin are facing less selling pressure, though uncertainties loom before the January payrolls report. The skepticism from 2025 about AI investments is reemerging. At that time, we questioned the massive capital expenditure pledges, and recent Q4 2025 earnings confirmed that spending is outpacing monetization. The top five tech giants are expected to exceed $200 billion in capital expenditures by 2026. Traders should consider protective put options for companies struggling to turn AI spending into profit. The divide in leadership among major tech stocks, which began last year, is growing. In 2025, Apple and Nvidia led the charge, and historical trends show hardware and infrastructure companies consistently outperforming big spenders in the second half of the year. This suggests that traders may want to explore pair trades, such as going long on semiconductor ETFs while shorting software companies that have yet to prove their AI investments can generate significant revenue.

Crypto and Sentiment Indicators

There is still a strong link between crypto markets and tech stock sentiment, acting as a quick indicator. Bitcoin recently fell sharply, down 10% from its highs around $85,000, coinciding with a drop in the Nasdaq 100 index. Monitoring these quick movements in crypto can signal a shift in speculative interest and help hedge tech exposure. We are noticing a repeat of last year’s safe-haven trends, with gold outperforming more speculative precious metals. The gold-to-silver ratio, which rose in 2025, has climbed to over 90:1, its highest in nearly two years, as traders seek stability. This suggests using options on gold miners or gold ETFs might be a more reliable hedge than silver options. Valuations are once again in the spotlight, creating opportunities in the options market. The CBOE Volatility Index (VIX) has stayed above 18 points, indicating market unease with high stock prices and uncertain returns. This environment is good for selling options premiums on overvalued companies that aren’t meeting the AI hype, using strategies like covered calls or bear call spreads to generate income while managing risk. Create your live VT Markets account and start trading now.

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