Why the Nasdaq is sliding and what is driving the drop in tech-heavy stocks

Over recent weeks, the tech-heavy Nasdaq Composite Index has shown clear weakness compared with its earlier highs. While markets fluctuate all the time, several interconnected factors appear to be contributing to the decline. This article outlines these factors using publicly available sources. It is for general information only — not a recommendation or financial advice.

Artificial-intelligence hype and valuation concerns

A major theme is the rise — and possible over-extension — of artificial-intelligence (AI) valuations. Many companies listed in the Nasdaq derive a significant share of their market capitalisation from AI expectations.

According to market commentary, growing scepticism over whether the AI surge can be sustained is leading to profit-taking. For example, analysts noted heavy weakness among chip-makers and AI-hardware suppliers.
Source: Fast Company, “Chip stock prices are falling across the board today; here’s the reason why” – https://www.fastcompany.com/91444183/nvda-intc-arm-amd-chip-stock-price-falling-across-the-board-today-heres-the-reason-why-nvidia-earnings

Investopedia notes that elevated valuations in the tech sector are a central concern: “elevated stock valuations, uncertainty about AI’s revenue potential …”
Source: Investopedia, “Here’s Why AI Bubble Fears Are Causing A Market Sell-Off” – https://www.investopedia.com/why-is-the-stock-market-surging-while-the-economy-looks-shaky-11807520

When prices reflect very high investor expectations, any sign of disappointment may result in sharper declines.

Rising interest rates and bond yield pressure

Another key driver is the rise in bond yields and the prospect of higher-for-longer interest-rates. Higher yields make future corporate earnings less valuable when discounted to present value — a dynamic that particularly affects growth stocks.

For example, Reuters reports that markets remain under pressure as expectations of a December interest-rate cut have diminished, weighing on tech stocks.
Source: Reuters, “Asia markets teeter ahead of Nvidia earnings test” – https://www.reuters.com/world/china/global-markets-global-markets-2025-11-19/

When long-term interest rates rise, investors often shift from high-growth tech stocks to assets perceived as safer or with nearer-term earnings.

Slowing earnings, economic uncertainty and landing risks

Market concerns also include slowing corporate earnings growth and broader economic uncertainty. Some of the companies grouped in the Nasdaq have reported results that failed to meet lofty expectations, raising questions about the sustainability of the prior rally.

Reporting by Business Insider points to three major headwinds: tariff risk, Federal Reserve independence questions, and surging bond yields.
Source: Business Insider, “3 reasons tech stocks are getting whacked to start the month” – https://www.businessinsider.com/tech-stock-selloff-market-crash-outlook-nasdaq-nvidia-amazon-2025-9

In times when growth appears less certain, high-valuation sectors tend to experience sharper correction.

Concentration risk and index weightings

The Nasdaq Composite is heavily weighted toward a handful of large-cap technology companies. This means any setback in those companies can disproportionately affect the overall index.

For instance, the decline of mega-cap chip-makers or cloud-computing firms has stronger impact on the Nasdaq than more diversified indexes.
Source: CBS News, “Stock market continues to fade as investors hedge against AI hype” – https://www.cbsnews.com/news/stock-market-today-down-ai-11-18-2025/

When a few components dominate the index, index performance can appear more volatile relative to broader market averages.

Market sentiment, technical signals and positioning

Sentiment plays a significant role in market movements. Many portfolio managers and fund-flow metrics indicate that investors are reducing exposure to growth-and-tech sectors due to perceived risk-reward shifts.

Technical indicators may also amplify moves: once certain support levels are breached in heavily monitored indices, algorithmic selling or momentum trading may accelerate declines.

According to analysts cited by CBS News: “the boost AI has given to the U.S. stock market … means investors are pre-occupied with whether the gains … can be sustained.”
Source: CBS News – https://www.cbsnews.com/news/stock-market-down-am-11-18-2025/

What this means for everyday households

While the Nasdaq is a U.S. index and most households outside the US may not hold significant exposure, there are indirect implications:

• Employers in technology-adjacent industries may delay hiring or investment when tech valuations decline.
• Pension funds or investment portfolios with global exposure may see a drop in value, which can affect long-term planning.
• Financial markets are interconnected — increased volatility may increase risk perceptions and impact borrowing or business sentiment.

However, this article is not advice about buying or selling investments; it is for informational purposes only.

Key points

• The Nasdaq slide appears linked to inflated expectations around AI, rising bond yields, economic uncertainty and heavy index concentration in tech.
• Growth stocks fatigue quicker when valuations are high and future earnings look less certain.
• Although no single driver explains every market movement, multiple factors are acting in concert.
• Understanding these dynamics may help explain why markets fall — but it does not predict what will happen next.

This article does not provide financial or investment advice. It presents general information to help you understand why the tech-heavy index may be under pressure.