The year-to-date performance chart shows that the US stock market began to slow down in early 2025. Giants like NVIDIA (-5.8%), Microsoft (-5.6%), and Tesla (-25%) plummeted, indicating fatigue after a major rally in 2024. Only the S&P 500 is still holding on slightly at +1.25%, suggesting that the AI euphoria is starting to fade and investors are becoming realistic about overvalued valuations.
The Information Technology sector leads the decline with -12.8%, followed by Consumer Discretionary at -14%. Interestingly, Energy (+9.3%) and Health Care (+6.1%) are actually leading. This major correction is triggered by concerns overvaluation and the effects of the release of new AI models like DeepSeek R1, which caused investors to reassess the 'bubble' in technology stocks.
Investors are beginning to exit technology stocks and shift to defensive sectors such as Utilities, Consumer Staples, and Financials. This phenomenon is known as sector rotation — a sign that the market is undergoing a flight to safety. Large capital is seeking stability after two years of high growth euphoria driven by AI.
Looking at the historical trends of the S&P 500 since 2010, the technology sector has often been a winner, but it is also the most vulnerable to sharp corrections. Each phase of the 'tech bubble' is usually followed by a normalization period. Now, sectors like Energy, Industrials, and Health Care are re-emerging as pillars that maintain the balance of the index.
The AI euphoria dominating 2024 is turning into a reality check in 2025. The market now demands real fundamentals, not just a technological narrative. Stocks with high valuations without concrete profit support are starting to fall behind. This is a healthy process — cleansing the market of excessive speculation while opening space for companies that are truly efficient and sustainable.
Correction is not a signal of destruction but rather an opportunity for rebalancing. Smart investors are now taking advantage of this momentum to strengthen their portfolios in undervalued sectors such as energy, health, and finance. 2025 could be a turning point toward a more mature market — where profit, not hype, becomes the main foundation of valuation.
