CNBC Daily Open: Tech sells off but AI isn’t going anywhere for now

This report is from today’s CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

Tech drags down Nasdaq
U.S. markets were mixed Monday. The S&P 500 and Dow Jones Industrial Average rose, but the Nasdaq Composite fell amid a broad tech sell-off. The pan-European Stoxx 600 index fell 0.55%, with most sectors in negative territory. U.K. borrowing costs ticked higher Monday, raising concerns on public spending cuts or further tax rises.

Potential new U.S. Steel bid
Cleveland Cliffs is partnering with rival Nucor in a potential bid for U.S. Steel, whose takeover by Japan’s Nippon Steel was blocked by the White House earlier this month, sources told CNBC’s David Faber. The offer would be in the high $30s a share. Nippon had planned to buy U.S. Steel for $55 per share in a deal valued at more than $14 billion.

Slowing inflation in India
India’s annual consumer inflation in December came in at 5.22%, according to the Ministry of Statistics and Programme Implementation. The reading’s lower than the 5.30% forecast by a Reuters poll of analysts, and the second straight month that price growth fell. The softer inflation reading offers room to the RBI to cut rates, amid slowing growth in the country.

Second blow to quantum stocks
Quantum computing stocks sold off Monday after Meta Platforms CEO Mark Zuckerberg said on a Friday podcast by Joe Rogan that the technology is “quite a ways off from being a very useful paradigm.” The comments reinforce recent commentary from Nvidia CEO Jensen Huang that suggested that the computers are likely 15 to 30 years away. 

[PRO] Rieder would 100% buy the Nasdaq           
The Nasdaq Composite underperformed other major indexes on Monday as investors rotated out of tech names. BlackRock’s Rick Rieder, who is the company’s chief investment officer of global fixed income, told CNBC he would “one hundred percent” buy the Nasdaq dip. Rieder explains his decision and how he would deploy downside protection.

The tech-heavy Nasdaq Composite lost 0.38%. Big tech names popular with investors broadly fell in Monday’s session. Palantir — the top-performing stock in the S&P last year —slid 3.4%, while Nvidia lost 2%, building upon their losses from last week. Nvidia fell almost 6% during the period, while Palantir lost more than 15%.

“That’s a necessary part of a corrective phase in our view and we are likely further along in this correction than many investors recognize since many stocks peaked in late November, early December,” said AXS Investments CEO Greg Bassuk, adding that Friday’s jobs report “cemented” those concerns.

However, the S&P 500 inched up 0.16% and the Dow Jones Industrial Index climbed 0.86% as investors rotated into nontech shares such as Amgen, Caterpillar and UnitedHealth.

That’s not to say those sectors will be taking the mantle of market leader anytime soon — or at all. Sectoral rotation is a common phenomenon in markets, as investors secure their returns and look for the next stocks with upside potential. And the backdrop of rising rates puts more pressure on growth-oriented tech stocks than value stocks, which typically make up the Dow.

Furthermore, the artificial intelligence frenzy isn’t over, judging by the latest earnings reports from TSMC and Foxconn, which trades as Hon Hai Precision Industry. Both companies saw their revenue boom on high demand for AI-related products.

A long-term rotation out of tech and AI isn’t likely. But one within the field cannot be dismissed.

— CNBC’s Samantha Subin, Hakyung Kim and Brian Evans contributed to this report.