The U.S. stock market's artificial intelligence boom is facing a setback. On March 3, Nvidia, a leading AI stock, dropped 8.69%, dragging the Nasdaq down 2.64%. The Dow Jones and S&P 500 also fell, by 1.48% and 1.76%, respectively.

The market faced challenges throughout February, with the Nasdaq dropping nearly 5%, while the S&P 500 and Dow lost about 2% each. Key factors included uncertainty over the Trump administration’s trade policies, rising geopolitical tensions, and a sharp decline in the cryptocurrency market.

Given this backdrop, how should investors interpret the recent sell-off in tech stocks, sector rotations, bond market movements, Fed policy, and global trade risks? To gain deeper insights, we spoke with Tim Anderson, Managing Director at TJM Investments and an experienced NYSE trader.

In this exclusive interview, Tim Anderson provides an in-depth analysis of the factors driving the recent correction in the tech sector, the shifting dynamics of sector rotations, and the impact of bond market trends on equities. He also shares his perspective on the Fed’s future rate-cut trajectory and its potential implications for the market. Additionally, Anderson examines the Trump administration’s proposed tariffs and their possible effects on various industries, discussing how markets might respond to these developments.Below is the full interview.

Southern Finance：Can you provide an overview of the recent market performance? What kind of trend is it showing?

Tim Anderson: Well, I think the key drivers have been that momentum has shifted dramatically in the stock market away from big tech and particularly the AI-driven technology stocks. There's been a considerable amount of selling in that sector. NASDAQ is going to be down about maybe 6% for February. It's going to be the worst month for NASDAQ since the fall of 2023. But it certainly has not been an across-the-board rout of the entire market because the S&P 500 and the Dow Jones and some other broad market averages have held up much better.

Southern Finance：So what factors have contributed to this technology “magnification 7” sell-off?

Tim Anderson: I think that a lot of these stocks were very extended on a technical basis and many of them were due for some profit-taking. Now, their earnings, for the most part, have certainly been more than okay. But I think there were some unrealistic expectations by some investors in the market that had built up a little bit as to how fast these—we've heard a lot about data centers and all the energy that was going to be required for these data centers and how many chips and new computer equipment would be required for these data centers.

And the reality is none of them have really even started to be built yet. And that whole project, because there are a couple of regulatory bodies that are going to have some say on that, might still be a year away, aside from data centers that might be built by just the individual companies.

Southern Finance：Do you think this trend of tech sell-off would continue or is it just temporary?

Tim Anderson: I think that, for the most part, it's a well-deserved correction. Certainly, there may be some companies that might have some issues going forward in terms of just being in the wrong part of the product mix or having a lot of competition from others that have wanted to get into this AI space, as it's been viewed over the last year, year and a half, as a real emerging growth sector for the market.

But I certainly think it's very different from 1999 when the tech bubble started to burst, and a lot of companies had cash burn issues, were having no revenue, and ran into serious financial problems.

That is certainly not the case for the companies that have been leading the charge in the AI-driven part of the tech rally.

Southern Finance：Do you think recent open-source AI models such as DeepSeek R1 pose a challenge to the dominant position of NVIDIA?

Tim Anderson: Well, I think it's definitely an alternative for some companies, but I still think there's a lot of questions about how that product was built, what the real costs were, and whether or not U.S. companies that are trying to build very high-end level generative AI data centers would view that as a potential alternative to the high-end NVIDIA chips.

Now, I know that maybe there are some people that are going to want to build some lighter versions of AI data centers that would find that to be a reasonable alternative. But I think in general, that product will be good for the entire tech space overall because it will make other competitors in the space be more cost-effective and cost-competitive.

Southern Finance：Right now, we also have a lot of macroeconomic factors affecting the market, such as the inflation data-PCE, and also the Q4 U.S. GDP growth data, and also as well as the labor market every Thursday, there are jobless claims. How do you think these macroeconomic data affecting the stock market performance?

Tim Anderson: Well, so far, the only real concern from all the data we've seen is that the economy might be slipping a little bit. Okay. Now, for months and the last couple of years, the big concern was inflation. We had a big PCE inflation number recently. It came in at an annual inflation level of 2.5 percent, unchanged from the last report. Certainly not a concern there.

But you will probably see some headlines about some job losses. A lot of those will be government jobs. It's been very well publicized that the government is looking to trim down the size of a lot of its federal agencies that have become very bloated and overstaffed over the last two to three decades.

And so there will likely be some headline job losses, although not in highly productive parts of the private economy. So the only other part of the data that's come out over the last week and a half or so showed a little bit of concern in consumer sentiment, and the extent to which the bullishness has gone down for investors on the stock market is almost unprecedented. In a very short period of time, that may actually be good for the market, because there is certainly not, right now excessive bullishness in the market.

And sometimes when that bullish number, when that investor sentiment number gets extremely high, that can be a red flag that too many people are too bullish. We are not in that situation right now.

Southern Finance：Do you see any sector rotations? Considering the sell-off in the tech sector, where does the money flow into? Which sectors?

Tim Anderson: We saw a very vibrant sector rotation into, I would say, consumer staples, into some consumer spending stocks, into even within the tech sector, into old-school tech. Names like IBM are within points of being at an all-time high. Definitely still a very significant technology name, but not as hyper-exposed to the AI subsector as a lot of other names are. Certainly, deep value stocks have gotten a lot of attention, not just this week, but over the last couple of months.

And it's also worth noting that the bond market, two to three months ago, when the 10-year yield on a Treasury bond would get up to 4.6% or a little bit higher, the market would get nervous. If we got up toward 5%, that might trigger some asset allocation trades or people buying bonds close to 5% and selling some stocks.

Now, that's all the way down to 4.25%. That might do two things. That might make the Fed more likely to cut a little bit more than the most recent expectations. In fact, there's right now a 75% chance that we will get a Fed rate cut in June.

And now I think we might get one before that. And the expectations are really still for two rate cuts this year. I think that's low. I still think we'll get three or four. And if we get one in June, that would mean we'd have two in the first half of the year. That would give the Fed a lot of room to maybe cut again in the second half of the year.

But I think that as we get into March, if the 10-year yield stays well below 4.5%, and it's at 4.25% right now, that will lead some support to the market. But we've also seen some good buying into high-dividend stocks, high-yield stocks. And many of those are also deep value stocks.

A stock that had underperformed for 15 to 20 years, AT&T, has very quietly moved 10 points higher over the last 12 months. That’s some sector rotation definitely going on.

And that's one of the reasons that the Dow Jones Industrial Average and the S&P and other broader-based market averages have not declined nearly as sharply as the Nasdaq and the tech-heavy indices.

Southern Finance：U.S. President Donald Trump also announced tariffs on imports from Canadian and Mexican goods. So how do you think this would affect the market?

Tim Anderson: Well, right now, it creates a tremendous amount of uncertainty, because we don't know to what degree those tariffs will actually be put in effect, and if they're put in effect, how long they will stay in effect.

Because it's very accepted now that he has used tariffs as a negotiating tool, not just on economic and trade policy, but also on some issues involving foreign policy, like Mexico closing their border and stopping the flow of fentanyl coming into the country from the U.S.-Mexico border.

There are many industries that would be highly impacted, from energy, oil, and gas with Canada, to lumber, to agriculture, and the automobile sector. The fact that there is that uncertainty is probably more of a factor than what the actual tariffs would be.

The market loves good news. It can deal with bad news because it can model it. What it really doesn't like is uncertainty. Right now, that uncertainty is probably causing consumer sentiment to be weaker than it was months ago.