Nasdaq 100 Outlook As Quantum And AI Bubble Fears Intensify

The Nasdaq 100 Index may be nearing a strong bearish breakout. Analysts are raising concerns about the AI and quantum computing industries.

The index, which tracks leading tech companies, fell by more than 1.4% in the futures market. It dropped from its all-time high of $25,120.

AI Bubble Risk Could Sink the Nasdaq 100 Index

One major risk for the Nasdaq 100 Index and its ETFs, like QQQ and QQQM, is growing fear around the artificial intelligence industry. This sector has driven much of the index’s growth in recent years.

However, some analysts believe it may be an inflated bubble. If true, it could eventually burst and trigger a sharp market correction.

A Bloomberg survey found that 54% of participants believe the industry is in an AI bubble. This marks a sharp increase from the responses in the September survey. Additionally, most of these analysts found out that the stock market was highly overvalued.

Shortly after that, the company inked a $100 Billion deal with Nvidia. This deal will see it use Nvidia chips worth billions in its data center build up. At the same time, the company took a stake in AMD, another top chip company. Altogether, OpenAI has entered deals worth over $1 trillion in the past few years.

It is unclear whether the company will have a return on investment from these investments. Bain analysts recently noted that the AI industry will require $2 trillion in yearly revenue.

This amount is needed to support the computing power for expected demand. The report found out that the world was $800 billion short to keep pace with that demand.

Another major risk is NVIDIA’s heavy reliance on a few key clients. This concentration makes the company vulnerable if demand from those clients drops. It generates approximately 50% of its revenue from a select group of clients, including Microsoft and Meta Platforms.

More experts are warning that the AI bubble is here. The most recent expert to warn that was Pat Gelsinger, the former Intel CEO, who reiterated this in a CNBC interview.

Quantum Computing Sector Risk Remains

Meanwhile, signs suggest the quantum computing sector may be forming a bubble. Many companies in the industry appear increasingly disconnected from real-world applications.

For example, IonQ has attained a market capitalization of over $24 Billion. It’s a substantial figure considering that the estimated revenue in 2025 and 2026 is $91 Million and $171 Million, respectively.

Rigetti Computing has reached a market capitalization of over $17 Billion. Yet, it’s only expected to generate $8 Million in 2025 and $21 Million in 2026.

D-Wave Quantum has a market valuation of over $13 Billion. Its estimated revenue is just $24 Million this year and $38 Million next year. All these companies are still making substantial losses.

Nasdaq 100 Index Technical Analysis

The Nasdaq 100 Index peaked at over $25,115 last week. It then experienced a pullback. Rising tensions between the US and China contributed to the decline. It then bounced back on Monday as these fears waned.

A closer look reveals that the two lines of the Percentage Price Oscillator (PPO) are nearing a crossover. This crossover appears to be forming in a bearish direction. Also, the Relative Strength Index (RSI) has pointed downwards slightly below the overbought level.

The index has also formed a rising wedge chart pattern, pointing to a strong bearish breakout in the coming weeks. If this happens, it may drop to the next key support level at $22,000.

A move above the year-to-date high of $25,115 would cancel the bearish outlook. It could also signal the potential for further gains.

The next potential catalysts for the Nasdaq 100 Index are the third-quarter earnings season. This has already started. This season will provide more information about the state of the AI sector. Additionally, it will react to statements from Jerome Powell and other Federal Reserve officials.