Tech's Largest Selloff in Five Years Arrives Right On Schedule

The Nasdaq 100 dropped 5.5% last week—its worst performance since April 2025. The Information Technology sector shed more than 6%, also marking its worst weekly performance since April 2025. The Philadelphia Semiconductor index, meanwhile, lost 10%. By Friday's close, the week had generated $7.5 billion in net selling activity across tech equities, making it the most net sold global sector. Hedge funds, according to Goldman Sachs, sold the largest percentage of tech on record.

This would be a dramatic story if it arrived as a surprise. It didn't.

Last week's selloff represents the largest tech sector sell skew in more than five years, according to Jefferies analysts. The granularity matters here. This isn't broad market weakness. This is surgical, concentrated, and deeply skeptical. The selling was most concentrated in semiconductors, memory, hardware, and communications equipment subsectors. Only horizontal software and IT/information services subsectors saw notable buy skew. The market, in other words, is making distinctions—distinguishing between companies that generate sustainable earnings and those whose business model depends on the continued willingness of investors to fund infrastructure buildouts at scales previously reserved for nation-states.

The proximate cause is predictable: CoreWeave shares collapsed more than 15% after reports confirmed the company is desperately seeking insurance-industry capital to finance its AI infrastructure. Widening credit spreads for AI data center companies prompted broader reassessment. But this is symptom reporting dressed up as causation analysis. The real story is structural.

Hyperscalers are expected to exceed $800 billion in capex during 2026, with spending expected to cross $1 trillion. This is not a sustainable trajectory without commensurate revenue expansion. Every dollar spent on GPU-powered infrastructure requires multiple dollars in eventual output to justify the initial investment. The market spent the last eighteen months pretending this was negotiable. Last week, it stopped pretending.

Jeffrey Favuzza, TMT equity strategist at Jefferies, offered language that cuts through the noise: "Simply put, there's a tremendous amount of angst in the market right now, and from our conversations and flows, there's been a very consistent and violent de-gross occurring over the last several sessions." Translation: hedge funds are reversing leverage positions en masse. They're not rotating. They're not rebalancing. They're exiting.

What makes this particularly instructive is the timing. The Nasdaq Composite fell roughly 3% while the broader S&P 500 climbed. This is not a flight to safety. This is a category-specific recognition that valuations and capex requirements have diverged from fundamentals in ways that can no longer be ignored by anyone reading past the headline.

The AI narrative spent 2024 and early 2025 operating in a space divorced from traditional valuation metrics. Investors told themselves a story about exponential productivity gains, autonomous systems, and applications yet to be imagined. None of these are implausible. All of them are unprovable at current equity prices. When narrative velocity exceeds fundamental velocity, markets correct. They don't negotiate. They don't grandstand. They liquidate.

That $7.5 billion in net selling activity last week wasn't algorithmic catch-up. It was mean reversion applying the only language it speaks: price discovery. The largest tech selloff skew in five years isn't a market anomaly. It's a market reaching a conclusion that the previous consensus had conveniently postponed.