- Wolfe Research warns that the near-term tech rally may be peaking, with markets looking 'toppy' and due for consolidation.
- Further upside hinges on a sharp drop in oil prices or a strong Nvidia earnings surprise on May 20, according to chief strategist Chris Senyek.
- Rising sensitivity to inflation data, after hotter wholesale price readings, has already weighed on sentiment.
Wolfe Sees Tech Rally Losing Steam
Semiconductors rebounded Wednesday after a prior dip, but Wolfe Research says the broader tech rally may be running out of steam. Chief strategist Chris Senyek warned that markets appear toppy in the near term, with tech stocks likely to consolidate after recent gains. "Without a sharp drop in oil or a blowout Nvidia earnings report on May 20, further upside looks limited," Senyek said in a note to clients.
Senyek also highlighted growing sensitivity to inflation data, noting that hotter-than-expected wholesale price readings have already dampened sentiment. The tech rally has been heavily concentrated in a handful of mega-cap names, leaving the market vulnerable to a rotation if macro conditions tighten.
Conditions for Continued Upside
Wolfe Research sees two potential catalysts that could extend the rally: a significant decline in oil prices, which would ease inflationary pressures, or a strong earnings beat from Nvidia on May 20. Nvidia's results have become a bellwether for AI-related tech stocks, and a positive surprise could reignite momentum. However, without such triggers, Senyek expects a near-term pullback or consolidation.
A Wolfe Research spokesperson confirmed the report's authenticity, and the firm was unable to provide further comment beyond the published analysis.
Update: As of Thursday morning, semiconductor stocks remain volatile, with the Philadelphia Semiconductor Index trading mixed.