If the past few weeks have been unkind to stocks, they have been especially cruel to the formerly highflying tech sector. That may not change soon.

While all major indexes are in the red for 2025, the Nasdaq Composite has fared the worst, as the artificial-intelligence excitement that powered so much of the rally since late 2022 has evaporated. The Roundhill Magnificent Seven exchange-traded fund and Nvidia are both taking even bigger lumps. The latter had been the tech stock that could do no wrong, but even strong earnings, released last week, couldn't help its shares.

Tariffs are partially to blame. Beyond the levies now in place, the possibility of further specific limits on chip exports to China are an overhang for Nvidia and its peers. Investors are also worried that U.S. tech companies are overspending on AI development vis-à-vis China.

In addition to all that, there are concerns that tariffs' chilling effect on global trade and tendency to boost inflation pressures could trigger a recession. That isn't great for AI stocks, given that they trade on optimism about the future rather than current results. And perhaps even more important, the tariffs and President Donald Trump's effort to rapidly slash federal employment have investors looking to stocks that can weather hard times, rather than faster-growing, riskier names.

That means, as Nvidia showed, strong earnings just aren't enough. As Mizuho's Jordan Klein put it in a research note Thursday, "we are learning by the day and week that when it comes to AI related stocks and their performance, FUNDAMENTALS DO NOT MATTER."

Commentary from big tech companies about their plans for more heavy capital spending aren't boosting confidence, or encouraging investors to buy as stocks fall, he said. "This is a TRUE CRISIS OF CONFIDENCE, along the lines of investors believing more and more that AI stocks just cannot work no matter how much they beat or guide. And God forbid results and guidance disappoint."

Only meeting expectations looks dangerous as well. Marvell Technology delivered slightly better-than-expected results and a financial forecast in line with expectations, but still managed to torpedo tech stocks on Thursday. Klein said the outlook actually looks lackluster given that Marvell's custom AI silicon programs are up and running at full tilt, and the company counts deep-pocketed Amazon.com as a customer. Investors were hoping to see that demand lift the financial guidance. pad out guidance.

Now, stock prices across the AI trade are in "survival mode," as he put it, as investors start to worry that expectations for growth, and valuations, might be too high. The data-center darling Credo Technology failed to rally after a so-called beat-and-raise quarter, raising doubts about the outlook for others, including Broadcom, slated to report after the close of trading Thursday.

Perhaps most worrisome is that an analyst who is upbeat about AI is raising the concerns. Klein argues that Nvidia and Taiwan Semiconductor Manufacturing have gotten too cheap and that the group will make a comeback in the second half of the year.

While that means investors who sit tight for six months will probably come out on top, human nature is the problem. "Smoke in the movie theater looks to be thickening by the day," he writes. "False alarm, or an inferno about to engulf you in your seat. Do you want to wait and find out?"

Others echo a similar theory.

"Clearly making heads or tails of the near-term price action is essentially impossible given what's going on in DC, but macro induced pullbacks have historically been decent buying opportunities" in the past, wrote Evercore ISI's Kirk Materne in his daily cloud-software note.

"Bottom line -- patience is going to be needed in the near term, but the combination of an inflection in revenue growth, solid opportunity, margin expansion, agentic monetization and reasonable valuations seems like a decent set up to us if one can take a roughly six month view."

His top ideas are Salesforce, Microsoft, Intuit, Snowflake and Workday, looking half a year out.

There are still plenty of strategists who also see the market as a whole recovering over time, even if volatility remains the name of the game. Piper Sandler's Craig Johnson, who still has a 6600 year-end target on the S&P 500, says there should at least be some support for the index as it hovers around its 200-day moving average, as it has resisted falling below that level during this round of selling.

Six months may feel like a small eternity, particularly given the daily rapid-fire news flow. Still, it will be August in the blink of an eye.

Maybe that smoke is from a summertime campfire. The question is whether to believe the scary stories told around it.