Is the Tech Sell-off a Turning Point? Reading This Week's Market as Quantitative Analysis, the Fed, and SpaceX IPO Converge

Against a backdrop of concerns over a prolonged conflict in Iran and anxiety regarding industrial structural changes driven by AI, the Nasdaq 100 has fallen more than 10% from its recent high, entering a "correction phase." However, analysis from quantitative market strategists suggests "statistics over panic." At the same time, with the SpaceX IPO, preparations for the Anthropic fund listing, and comments from Fed Chair Powell converging, it has been a week packed with material for tech investors.

1. Fed Chair Powell's Remarks—The Signal That "Waiting Is Best"

1-1. The Core of the Remarks at Harvard

Fed Chair Powell demonstrated a clear stance on the current situation during a roundtable at Harvard University. When the message that "the Fed is in a good position to wait and see for the time being" reached the market, yields on both 2-year and 10-year Treasury notes fell by approximately 9 basis points.

1-2. Fed Tools Are Ineffective Against Supply Shocks

What Chair Powell repeatedly emphasized was "the limitations of monetary policy in the face of supply shocks." The rise in energy prices caused by the conflict in Iran is a supply-side issue that is difficult to address through interest rate manipulation.

"If the Fed were to raise interest rates now, it would take more than a year for the effects to appear in the economy. By that time, the economic situation could be completely different."

In other words, the Fed's strategy is to "act by not acting." They are not rushing to raise or lower rates, and while maintaining confidence that inflation is heading toward the 2% target, they are gauging their next move. They will monitor the situation if rising energy prices spill over into the broader economy through gasoline and transportation costs, but at this point, they are prepared to treat it within the framework of a "temporary supply shock."

2. Is the Tech Sell-off a Buying Opportunity?—Analysis by Quantitative Strategist Denise Chisholm

2-1. Entered the "Bottom Third" in the Last 60 Years

Fidelity quantitative market strategist Denise Chisholm provided clear figures regarding the current valuation of the tech sector.

"Going back to data from the 1960s, the tech sector is currently in the bottom third of the cheapest levels seen over the past 60 years. It hasn't been this cheap in over a decade."

And there is a probabilistic conclusion derived from historical data. When the tech sector reaches this level, there is a 70% probability that it will outperform the overall market 12 months later.

"70% is not 100%. However, looking at risk-reward, the opportunity is clearly greater on a one-year time horizon."

2-2. An Abnormal Divergence of "Record Profits x Lowest Valuation"

Furthermore, there is data worth noting. The current software sector is experiencing an "extreme divergence" where it is achieving "record-high profitability" while its valuation (forward P/E ratio) is approaching its lowest historical levels.

"Profitability is at an all-time high, yet valuations are at bottom-tier levels—this combination has occurred with a frequency of only 2% across all industries in data since 1960."

Similar phenomena in the past have occurred during large-scale financial crises like the Lehman Shock. While there is no precedent specific to the software sector, there is a track record of outperformance continuing with a 50/50 probability in similar phases for telecommunications equipment, hardware, and semiconductors.

2-3. Rebuttal to the "This Time Is Different" Argument

To the question of whether historical patterns might no longer apply due to the AI revolution, Chisholm replied as follows.

"Looking back at history, the argument that 'this time is different' has always existed. However, the market has repeatedly 'climbed the wall of worry.' Changes like AI can sometimes act as an unexpected tailwind in the form of productivity gains, GDP growth, and improved profit margins."

2-4. Impact of Rising Energy Costs on Tech

With Brent crude reaching $112/barrel, how should we view the impact of rising energy costs on the tech industry? Chisholm emphasized the differences from the 1970s and 80s. The energy dependency of the overall U.S. economy has dropped significantly since the 1980s, so the impact of the same oil price increase on corporate earnings is far smaller than it was back then.

"There is certainly an impact on consumers' real income. However, the impact within the current economic structure may be overestimated when compared to the stagflation of the 1970s and 80s."

3. SpaceX IPO—The Full Picture of a $1.75 Trillion Valuation and $75 Billion Raise

3-1. Valuation After Merger with xAI

According to reports from Bloomberg, The Information, and others, SpaceX is aiming for an IPO valuation of $1.75 trillion and a target raise of up to $75 billion following its merger with xAI. This raise, which would be the largest among currently publicly traded companies, is equivalent to more than 2.5 times the size of the Saudi Aramco IPO (approximately $29 billion).

The valuation before the merger with xAI was around $1.5 trillion, but some view the increase to $1.75 trillion as a result of the merger's synergy. However, one investor pointed out, "No one is talking about the impact of tariffs on SpaceX yet. That could be a major variable."

3-2. What Are Investors in SpaceX Buying?

VC/fund investor Joseph answered this question candidly.

"Investing in SpaceX is investing in Elon Musk. The ecosystem he has built by combining space, AI, and infrastructure forms a moat that no one else can imitate."

The analysis is that SpaceX is now repeating the 'vertical integration' method that Tesla used to eliminate its external dependence on batteries, this time with chips and AI. While Amazon is attempting to compete with Kuiper (satellite communications), the view is that they are currently at a different stage.

3-3. Coordination with Artemis II—Coexistence of NASA and SpaceX

With Artemis II, NASA is conducting a crewed lunar orbit flight for the first time in 50 years and is preparing for a moon landing in 2028. This mission is testing a 'new-old fusion' model that mixes legacy players like Boeing and Lockheed Martin with emerging companies like SpaceX and Blue Origin.

The project for landing on and inhabiting the moon is being promoted from both the geopolitical context of the space race with China and the long-term economic rationale of developing a lunar economy.

4. Investment in Anthropic—'Has a First-Mover Advantage Over xAI'

4-1. The Fund's Second-Largest Holding

Joseph, who is preparing to list a fund for investment in SpaceX, revealed that Anthropic is the fund's second-largest holding (surpassing xAI).

"We hold more Anthropic than xAI because their strategic choice to focus on enterprise customers was correct. Their 'Constitutional AI' approach, centered on AI safety, has become a differentiator in an environment where regulatory risks are rising."

4-2. The Difference Between xAI and Anthropic

He pointed out that while xAI gained capital through its merger with SpaceX, it previously faced capital challenges in its competition with Anthropic. The assessment is that while Anthropic has steadily increased its adoption by major corporations and government agencies, xAI has not yet reached that stage.

Summary: "Maximum Fear is a Statistical Buying Opportunity"

This week's market saw a convergence of multiple signals. Chair Powell declared a "wait-and-see" approach, containing risk to some extent. Quantitative analysis indicates that "tech is at a once-in-a-decade valuation low." The SpaceX IPO is waiting in the wings as a potential catalyst for risk-on sentiment.

However, as Chisholm says, a 70% probability is not a certainty. Risks such as persistently high energy prices cooling demand in the real economy, the prolonged nature of the situation in Iran, and the potential culling of software companies due to structural changes in the AI industry all exist in parallel.

The challenge for current investors is to make decisions while understanding both "what the statistics say when fear is at its peak" and "the risks unique to this time."

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