Nasdaq at the Crossroads: Can Tech Hold Its Ground After US CPI?

Quick overview

The Nasdaq is once again in the hot seat. The markets got a verdict and a new set of questions from Wednesday’s release of the May Consumer Price Index (CPI) — and for technology investors the answers are very real.

The Print: Better Than Expected but Less-Than-Pleasing

The Consumer Price Index increased 0.5% on a seasonally adjusted basis in May, bringing the annual inflation rate to 4.2%, the highest since April 2023, the Bureau of Labor Statistics reported. Both figures were in line with the Dow Jones consensus. On the surface, that in-line print is the least-bad scenario for equities: no hawkish surprise, no immediate capitulation. CNBC

But the fine print tells a more cautious story. The core CPI, which excludes food and energy, ticked up 0.2% for the month, a pace lower than 0.3% forecast and the 0.4% increase in April. Much of May’s headline inflation was driven by a 3.9% jump in energy prices, pushing the 12-month energy gain to 23.5%. The difference is important: rapid surges are generally short-lived, but they are a constant burden on confidence as long as the U.S.-Iran conflict keeps oil prices high. CNBC

Tech Was Already on the Back Foot

Today’s CPI report came at a time when markets were already downbeat. The sector-wide selloff last week stemmed from a disappointing outlook for AI chips from Broadcom, which brought down both AMD and Intel by double digits and pulled the Nasdaq Composite down more than 4% in one day, the most since April 2025’s tariff shock. Nasdaq 100 futures continued to extend those losses this morning with the futures index down more than 1.6% ahead of the CPI release, as investors continued to pare holdings of technology stocks amid overvalued AI valuations and growing rate-hike risk. CNBCBarchart

The Nasdaq 100 index dropped about 2% on Tuesday, as the S&P 500 declined 1%, and fresh doubts emerged that the rally in stocks of chip and data-center companies fueled by artificial intelligence could have been too hot to handle. TRADING ECONOMICS

The Fed Overhang

The data arrives just a week before the Federal Reserve’s June 17 meeting. Markets are pricing in a near-certain hold at the June FOMC, but looking further out to December, there is now a nearly 30% probability of a rate hike, according to CME FedWatch. That tail risk is enough to keep rate-sensitive, high-duration tech stocks on edge. Yahoo Finance

Earnings: The Next Catalyst

Now that inflation data has been taken in, the next big challenge for the Nasdaq is the earnings cycle. Goldman Sachs estimates that the largest hyperscalers will spend nearly $800 billion on capital expenditures this year — an 80%-plus increase year-over-year — with that figure set to climb above $900 billion in 2027. Hyperscaler capex is on track to consume roughly 75% of those companies’ cash flows, a ratio reminiscent of the late 1990s tech boom. Investors are asking for evidence that these expenses are paying off, rather than costing them money. Charles Schwab

The Path Forward

Today’s in-line CPI figure is a welcome respite for equities, but it does not eliminate the underlying uncertainty of tech. The next big event that could determine the Nasdaq’s direction will be whether core inflation continues to ease in the coming months — and if Q2 earnings from the AI bellwethers justify the massive capital pledges the industry has made. At this moment, the index is at the crossroads of a waning macro headwind and an emerging fundamental reckoning. The resilience trade is still alive, but it is earning its name the hard way.

ABOUT THE AUTHOR See More

Arslan Butt

Lead Markets Analyst – Multi-Asset (FX, Commodities, Crypto)

Arslan Butt serves as the Lead Commodities and Indices Analyst, bringing a wealth of expertise to the field. With an MBA in Behavioral Finance and active progress towards a Ph.D., Arslan possesses a deep understanding of market dynamics. His professional journey includes a significant role as a senior analyst at a leading brokerage firm, complementing his extensive experience as a market analyst and day trader. Adept in educating others, Arslan has a commendable track record as an instructor and public speaker. His incisive analyses, particularly within the realms of cryptocurrency and forex markets, are showcased across esteemed financial publications such as ForexCrunch, InsideBitcoins, and EconomyWatch, solidifying his reputation in the financial community.

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