NEW YORK, January 1, 2026, 13:38 ET — Market closed
- Nasdaq slipped 0.76% in the final session of 2025, with tech among the biggest sector decliners.
- Traders are weighing rate-cut expectations against rich valuations for mega-cap tech and AI-linked chips.
- Chip supply-chain headlines tied to China remain in focus ahead of early-January data and earnings.
U.S. technology stocks closed out 2025 with a late dip, pulling the Nasdaq lower in year-end trade, as Wall Street remained shut on Thursday for the New Year’s Day holiday.
The slide matters because tech’s outsized run has left investors sensitive to interest-rate swings and any hints that demand for AI hardware is cooling. Growth stocks tend to benefit when borrowing costs fall, but they can drop fast if rates rise or earnings expectations slip.
Strategists say 2026 will test whether earnings growth can keep up with the optimism priced into mega-cap tech, even as futures markets point to at least two more quarter-point rate cuts this year. LSEG earnings research projects S&P 500 profit growth of more than 15% in 2026 after about a 13% rise in 2025, a backdrop that investors are using to justify still-high valuations. 1
In the final session of 2025, the Nasdaq fell 0.76% to 23,241.99, while the S&P 500 dropped 0.74% and the Dow slid 0.63%. Tech and energy were among the biggest S&P 500 sector decliners, and Microsoft fell 0.8%, as turnover sank to 11.17 billion shares versus a 15.8 billion-share daily average; a “Santa Claus rally” — the typical late-December lift — failed to show up. “This is basically profit-taking and low liquidity,” said Giuseppe Sette, co-founder and president of investment research firm Reflexivity. 2
Sector trackers told the same story. The Technology Select Sector SPDR ETF (XLK) fell about 1% and the iShares Semiconductor ETF (SOXX) slid about 1.2%, while the Invesco QQQ ETF — a basket that tracks the Nasdaq-100 — lost about 0.8%; ETFs are funds that trade like stocks and can serve as quick readouts on sectors.
Rate expectations stayed central. Minutes from the Federal Reserve’s Dec. 9-10 meeting noted that market participants expected a 25-basis-point cut (a basis point is one-hundredth of a percentage point) at that meeting, and options implied two additional cuts next year; the minutes also said Treasury yields rose slightly. 3
Chip names also faced fresh supply-chain and policy cross-currents, a recurring driver for AI-related stocks. Nvidia has approached Taiwan Semiconductor Manufacturing Co about ramping up production of its H200 chips to meet demand from Chinese tech firms, Reuters reported, underscoring how export rules and regional demand are shaping the AI hardware cycle. 4
Separate Reuters reporting said the United States granted TSMC an annual license to import U.S. chipmaking tools into China, replacing authorizations that expired at year-end, while a separate Reuters exclusive said Beijing has required chipmakers seeking approvals for new capacity to use at least 50% domestically made equipment for expansion. For investors, the mix of U.S. licenses and China’s self-sufficiency push keeps the outlook for chip supply chains — and for equipment makers that sell into Asia — on the front burner. 5
Before the next U.S. session on Friday, traders will watch whether thin post-holiday flows extend the late-year pullback, or whether dip-buyers step back into mega-cap tech that led much of 2025’s gains.
The first big macro test comes early next week. The ISM manufacturing PMI — a closely watched survey of factory activity — is scheduled for 10:00 a.m. ET on Monday, Jan. 5, according to Investing.com’s economic calendar, and can move yields and rate expectations that feed directly into tech valuations. 6
The following week brings higher-stakes reads. The U.S. employment report for December 2025 is scheduled for 8:30 a.m. ET on Friday, Jan. 9, and the CPI inflation report for December is due at 8:30 a.m. ET on Tuesday, Jan. 13, according to the Labor Department’s release calendar. 7
Later in January, investors will refocus on the Fed itself, with the central bank’s next policy meeting set for Jan. 27-28. 8
Earnings will also start to set the tone for tech and AI demand. TSMC’s fourth-quarter 2025 earnings conference is scheduled for Jan. 15, and Netflix has said it will post fourth-quarter 2025 results on Jan. 20 — early markers for investor positioning ahead of the heavier wave of U.S. mega-cap tech reports later in the month. 9
