Tech stocks plunged on Thursday and rebounded a bit on Friday, but the Nasdaq has now fallen for four consecutive weeks.

On top of Friday’s stronger-than-expected nonfarm payrolls, the market now faces two major pressures at once.

On one hand, strong employment data have pushed rate-hike expectations back up; on the other, policy uncertainty following the midterm elections is prompting investors to question the pace of AI data center construction.

At this point, there are a few fairly clear events on the calendar for next week.

CPI and PPI data, CoreWeave’s earnings, and earnings from Applied Materials and Cisco.

If these three fronts can produce a positive alignment, tech stocks still have a chance at a near-term recovery. But if inflation comes in hotter than expected and earnings reveal problems with orders and financing, things could get really ugly...

First, the data.

Friday’s nonfarm payrolls report was a bit awkward.

The U.S. added 165k jobs in October, far above market expectations of around 65k, while the unemployment rate fell from 4.2% to 4.1%.

The economy isn’t showing clear signs of weakening, which should normally be good news. But the problem now is that U.S. inflation remains elevated, and the Federal Reserve hasn’t completed its tightening cycle.

One detail: next week’s CPI report will differ slightly from usual. Most categories won’t include year-over-year inflation rates because the U.S. government shutdown last October left price data unavailable, making it impossible to calculate the increase for that period.

If core CPI can hold steady at 0.2%, that could ease sentiment considerably in the near term.

Next up is CoreWeave’s earnings.

Its importance to next week’s market is on par with that of some major tech companies.

That’s because CoreWeave represents one of the most aggressive business models in AI infrastructure investment: raise large amounts of financing, buy GPUs, build data centers, then recoup the investment through long-term computing contracts.

It has also been one of the sources of recent market anxiety.

The market currently expects third-quarter revenue of around $3.5 billion. But revenue isn’t the decisive factor. What really matters this time is whether the company has cut capital expenditures, improved financing terms, increased actual delivery capacity, and brought interest costs under control.

If management can show that financing is proceeding smoothly, deployment is accelerating, and profitability is improving, that would be an important sentiment catalyst for other AI infrastructure stocks sensitive to financing and expansion.

Otherwise, fears of valuation compression will persist...

As for Applied Materials and Cisco, the former is probably in good shape, since the company recently offered a more optimistic long-term outlook. For the latter, the key question is whether AI networking demand can translate into revenue, as contract recognition has been somewhat slow.

Also, the Philadelphia Semiconductor Index’s forward P/E has fallen to around 13x, close to its lowest level since 2019. But this is largely based on analysts’ sharply raised expectations for future earnings.

So this is precisely the central tension next week.

Semiconductor stocks may look cheap, but if future earnings forecasts start to be revised down, a 13x P/E may just be a false safety net.

This game is really too hard😮‍💨

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