Markets experienced a sharp shift from a "Goldilocks" scenario (neither too hot nor too cold) to a "Capex Panic" and rotation pains. The main theme of the week was the fear that the massive amounts of money poured into AI infrastructure by tech giants (such as Google nearly doubling its investment spending) would suppress profitability in the short term. This led to sharp sell-offs in Nasdaq and technology stocks, while the "Equally Weighted S&P 500" (RSP) and the energy sector reached all-time highs as investors sought safe havens or turned to value-driven strategies. The market narrative evolved from a "buy everything" mode to a "prove return on investment (ROI)" mode.

On the macro front, the biggest game-changer was President Trump's nomination of Kevin Warsh for the Fed chairmanship. Jerome Powell's departure in May created a new layer of uncertainty in the markets regarding the future of monetary policy. Although Warsh is known as a "hawk" in the past for his criticisms of quantitative easing (QE), he may be forced to keep the liquidity taps open due to the upcoming midterm elections and Trump's growth-focused pressures. Markets are currently pricing in a scenario where Warsh will "speak tough but act softly."

Towards the end of last week, market sentiment was marked by a clash between a "mini-crash" in technology stocks and a rally in traditional sectors. The 22% drop in Bitcoin and the 30% decline in MicroStrategy highlighted the fragility of risk appetite. However, the sideways movement in general indices (SPY) suggests that this sell-off was more a profit-taking and sector rotation from overinflated valuations rather than a systemic crisis. Whether this divergence continues next week will be the main focus.

Cracks are deepening in the employment market, creating a critical signal for the Fed's interest rate path. According to the Challenger report, layoffs in January reached 108,435, a 118% increase compared to the same period last year. This is the highest January figure since the Great Recession of 2009. ADP private sector employment also increased by only 22,000, well below expectations (45,000). The market is interpreting this data as a sign that the economy may hit a harder wall than a "soft landing"; the low number of jobless claims is the only consolation for now.

On the Fed side, Kevin Warsh's nomination has changed all calculations. Analysts do not expect any interest rate cuts until the June FOMC meeting where Warsh will take office. Sticky inflation around 3% and the economy still "hot" due to fiscal stimulus are delaying any rate cuts. While Warsh's "Central Casting" profile (as Trump calls it) attempts to instill confidence in the markets, the bond market will test the new administration's sincerity regarding budget discipline and the fight against inflation.

10-year bond yields are expected to trade in the 4.25% - 4.75% range. If the deterioration in the employment market accelerates (as seen in the Challenger data), the Fed's hand may be strained sooner than expected. However, the current base scenario is that inflation will remain high until the summer and the Fed will maintain its "higher for longer" stance. Despite the poor employment data, the market has not yet aggressively priced in a rate cut, indicating that investors still believe the Fed prioritizes inflation concerns over growth concerns.

There is a complete divergence across the main indices. The S&P 500 (SPY) closed the week flat (-0.20%), while the technology-heavy Nasdaq 100 (QQQ) lost over 2.5%, breaking its short-term trend support. In contrast, the Equally Weighted S&P 500 (RSP) and Dow Jones (DJIA) tested new all-time highs, indicating widespread buying across the market. This suggests the market hasn't "crashed," but rather experienced a change in leadership, with money fleeing mega-cap technology and flowing into less expensive stocks.

Technically, for the QQQ, a drop below 600 is concerning, and the pullback to 595 could be interpreted as a continuation of the downtrend that began in January. For the S&P 500, the 690 region is a critical equilibrium point. On the volatility front, despite sharp 10%-20% movements in individual stocks, the fact that the VIX index did not surge to crisis levels indicates that institutional investors are not panicking, but rather rebalancing their portfolios.

Although the VIX trend bands have remained in a "buy" signal since December 10th, the market structure is fragile. It seems difficult for the SPX to rise, supported by the technology sector, without stabilization, especially in the crypto market and software (SaaS) stocks. The current technical outlook suggests the index is in "range bound" mode, but momentum is weakening against the bulls, particularly in the technology sector.

The clear winners in sectoral rotation were the Energy (XLE) and Raw Materials sectors. The escalation of Iran-US tensions and rising oil prices propelled energy stocks to all-time highs. Investors are fleeing the uncertain returns of AI spending and seeking refuge in “old economy” stocks with strong cash flow and inflation protection. Yardeni Research emphasizes that this rise in the energy sector will continue and that value stocks are beginning to outperform growth stocks.

On the other hand, the Software (SaaS) sector is experiencing a veritable “massacre.” Giants like MongoDB, Salesforce, and Adobe have lost between 20% and 30% of their value due to fears that AI will automate coding and business processes, destroying their business models (AI disruption). Wedbush analyst Dan Ives describes this situation as a “Software Armageddon,” while the market is relentlessly driving down the P/E multiples of these companies.

The financial sector is also gaining strength with expectations of deregulation from the Trump administration (such as the KBWR Regional Banking ETF). Semiconductors, however, are experiencing a mixed performance; Nvidia and equipment manufacturers (Semiconductor Equipment) are benefiting from the surge in demand, while other areas (like AMD) where competition is increasing and margins are being squeezed are struggling to satisfy investors. In short, money is flowing from "dream sellers" to "commodity and cash producers."

Looking at company news:
• Alphabet (Google): The company announced it will nearly double its capital expenditure (Capex) for AI infrastructure this year (in the $175-185 billion range). The stock fell on fears that this massive expenditure will crush profitability, but the acceleration in cloud revenue and CEO Sundar Pichai's statement that "we would sell more if there were no capacity constraints" still presents a "great story" for long-term bulls.

• Broadcom (AVGO): The company benefited most from Google's massive Capex increase, with its shares rising 6.2%. Broadcom, a major supplier of Google's custom AI chips (TPUs), is a direct beneficiary of the "Hyperscaler" spending spree. The market is repricing the company as the safest "digging and shoveling" player to profit from the surge in AI infrastructure spending.

• Amazon (AMZN): Disappointed investors by failing to meet fourth-quarter earnings per share (EPS) expectations, with its shares falling over 5.5%. While growth continues in the AWS and Retail segments, rising costs and operational expenses are weighing on profitability. Analysts have begun revising their target prices downwards due to the increased payback period for the company's AI investments and the risk of narrowing margins.

• AMD: Fourth-quarter revenue exceeded expectations at $10.3 billion, and guidance for the first quarter was $9.5-$10.1 billion (expected $9.4 billion). However, the stock fell over 8% (losses deepened in the following days). Markets "sell the news," pricing in the fact that market share gains in competition with Nvidia were not fast enough and that the impact of the "MI450" chips would only be seen in the second half of the year.

• Palantir: Increased revenue by 70% year-over-year to $1.4 billion, proving it is in "hypergrowth" mode. Despite the general tech sell-off in the market, the explosion in corporate demand for its AI platform (AIP) supported the company's fundamentals valuation. Analysts argue that Palantir is the best stock for those who are not "lucky rich."

• Hims & Hers: Novo Nordisk's stock plummeted more than 60% from its recent peak amid fears that the company may take legal action against pharmacies producing compounded versions of its popular weight-loss drug (GLP-1). While the company announced the launch of a multi-cancer screening test (Gallery) as a defense mechanism, investors view the possibility of its main revenue stream, weight-loss drugs, hitting a legal wall as an "existential risk."

• Super Micro Computer (SMCI): Earnings per share of $0.69 exceeded expectations of $0.49. The company is rapidly increasing production capacity to meet sky-high demand for AI servers. These results confirm that AI infrastructure spending (Nvidia, ANET, SMCI, Vertiv, and ALAB) remains the safest haven.

• SoFi: Defied analyst expectations by forecasting earnings per share of $0.60 and over 50% growth for 2026. While margin expansion in the banking and technology segments is noteworthy, the stock has lost 27% of its value in the last three months. The market tends to sell even excellent balance sheets due to macroeconomic concerns and general uncertainty in the fintech sector.

• Robinhood (HOOD): Due to the sharp decline in the cryptocurrency market (Bitcoin down 22%, Ethereum down 52%), the stock has fallen around 40% from its peak. However, it rebounded by 13.9% towards the end of the week as Bitcoin reacted to the $68,000 level. The company's fate remains tightly tied to crypto volatility, which directly impacts trading volumes, and individual investor risk appetite.

• Enphase Energy (ENPH): Signaled a turnaround from the bottom in the renewable energy sector, recording a massive weekly increase of 38.6%. Despite the postponement of interest rate cut expectations, signs of demand recovery and rotation towards the energy sector aggressively pushed the stock upward from the "oversold" zone.

• Software Sector (MongoDB, Intuit, Snowflake, Adobe): These companies are collectively priced as "AI Victims." Adobe fell 17%, Salesforce 24%, Intuit 30%, and Snowflake 22% (monthly). Investors are hesitant to touch these stocks without seeing tangible AI revenue growth, fearing that generative AI will disrupt these companies' business models (coding, design, accounting).

This week, markets will be focused on inflation data (CPIs). A renewed CPI push, due to its impact on the Fed's interest rate decision, could fuel market fears that "interest rates will remain high for a long time." The test will be whether inflation is sticking around 3%, rather than falling towards the 2% target.

Also, speeches from Fed officials and signals from the Senate regarding Kevin Warsh's nomination process will be closely watched. The market will be looking for clues as to whether Warsh will pursue aggressive monetary tightening or a Trump-aligned "growth-focused" policy. Any "hawkish" statement could hit tech stocks, which are trying to recover, again.

We are entering one of the busiest weeks of earnings season. High-beta technology stocks, particularly favored by retail investors, crypto-focused companies, and AI infrastructure players will take center stage. Following last week's "tech sell-off," the guidance from these companies will be crucial for the market's direction. The market is currently in a high-volatility regime. Don't let the fact that the VIX hasn't exploded fool you; the "violent rotation" across sectors is shaking portfolios. Liquidity is still present, but if it's not in the right place (Energy, Infrastructure), it punishes the investor.

Risks:
Employment Collapse (Doom Loop): Increased layoffs -> Decreased consumer spending -> Erosion of corporate profits -> Further layoff cycle.
AI ROI Fear: The perception that the hundreds of billions of dollars spent by giants like Google and Meta are not generating revenue in the short term.
Warsh Uncertainty: The new Fed nominee creating fear of "austerity" in the bond market, pushing interest rates higher. Crypto Contagion: The sharp declines in Bitcoin and Ethereum could spread to the general public through companies with crypto exposure (MicroStrategy, Coinbase). Geopolitical Tensions: Iran-US tensions could further drive up oil prices and fuel inflation.

Opportunities:
Energy Sector (XLE): Rising oil prices and geopolitical risks are making energy stocks the safest haven (hedge).
Asymmetric Growth Stocks: Oversold, high-quality companies. These have fallen over 50% from their recent highs but have strong fundamental data (revenue growth, margins), offering opportunities to buy the dip.
Palantir (PLTR): Continues to stand out as a "guaranteed" winner in government and corporate AI spending.
US Critical Minerals: Domestic mining and materials companies that will receive $12 billion in government support under "Project Vault". AI Infrastructure Demand: The lion's share of the 60% server investment budget of MAG7 giants is being taken by smaller players like Arista, ALAB, Vertiv, and Celestica.

The current market picture screams that the era of "blind buying" is over. Amazon and AMD show that even if companies exceed expectations, they are penalized if they aren't "perfect." The most sensible positioning for investors right now might be to hold cash-flow-strong Energy and Infrastructure stocks that provide protection against inflation and geopolitical risks. Alternatively, it might be time to gradually accumulate "high-faith" technology/growth stocks (like Palantir, SoFi, Robinhood, or selective SaaS stocks) that were unfairly penalized during recent downturns but whose story remains intact.

Global markets are pricing in a rare "booming economy" phase where interest rates remain high but growth is absorbing that pressure. The key message for investors this week is to pursue earnings momentum rather than being "paralyzed" by macroeconomic uncertainties. AI investments are no longer an option, but a vital necessity for the internal operations of tech giants. The productivity revolution continues to solidify a long-term bullish story beyond macroeconomic noise. Therefore, instead of increasing cash during pullbacks, a gradual shift to incremental purchases of solid stocks is advisable.

The information, comments and recommendations contained herein are not within the scope of investment consultancy. Investment consultancy services are provided within the framework of the investment consultancy agreement to be signed between brokerage firms, portfolio management companies, banks that do not accept deposits and customers. The comments in this article are only my personal comments and these comments may not be appropriate for your financial situation and risk return. For this reason, investments should not be made based on the information and comments in my articles.