Buy the AI Dip While You Can: Crypto Sell-Off Is Driving the Bear Move, but a New Bull Is on the Way

The broad reversal on Thursday was startling, especially with Nvidia delivering blockbuster Q3 earnings and September nonfarm payrolls showing solid strength ahead of the shutdown. We previously suggested that the crypto decline could spark a deeper slide in risk assets, and that view has now been validated as BTC dropped below its psychological support level. However, both technical and fundamental signals indicate investors should not turn overly pessimistic during this pullback, as the market's underlying strength can support a new bull phase once bearish sentiment fades.

Starting with technicals, the tech-heavy Nasdaq 100's sharp reversal pushed it to another session low, extending the "lower high, lower low" pattern and returning it to September levels. At the same time, trading volume surged to the highest since October 10th, a day when the index swung 4% after President Trump threatened additional tariffs on China. That setup ultimately became a strong entry point as stocks recovered quickly and reached new highs once Trump softened his tone and attention shifted back to AI and the economy.

This time the backdrop is different. The BTC-led crypto downturn appears to be the main force behind the broader market slide, given that both crypto and tech sit in the same risk-asset category. Once BTC broke below $90K on Thursday, investors moved decisively into risk-off mode, creating a catalyst for widespread selling. For a broad recovery to emerge, BTC stabilizing may be the key. After the latest drop, BTC's RSI fell to 11, the lowest since February 26th, when a strong rebound followed. This suggests the current setup offers a more favorable risk-reward profile, even if it remains uncertain whether the next move is a true reversal or a dead-cat bounce. Still, the odds support a rebound, and a bounce in BTC could help lift risk assets overall.

From a day-trading perspective, markets often struggle at the open after a large sell-off, with selling pressure lingering and dampening buy-the-dip appetite. As the session progresses, further declines can increase the probability of an intraday reversal as shorts unwind, sentiment shifts, and indexes drift toward flat. This scenario can create opportunities for day trades or zero-day options. Whether to hold bullish positions afterward or wait for a deeper pullback depends on individual strategy.

Fundamentally, the economy remains resilient, and the AI trade is likely to remain a major theme through 2026. September nonfarm payrolls showed a firm labor market, with no signs of recession, and the economy appears capable of absorbing the impact of October's shutdown. A December rate cut is relatively insignificant because a healthy economy points to a stronger outlook, and with Chair Powell retiring in May, Trump's influence will carry more weight. The Federal Reserve will likely begin easing eventually, so December's decision should not be overemphasized. A solid economy is essential, while easing is an added benefit, not the core driver.

The AI story continues to strengthen. Nvidia guided to $65 billion in Q4 revenue, a 14% sequential increase from an already extraordinary Q3, and signaled that roughly $500 billion in orders between 2025 and 2026 will likely expand even without China. Nvidia demonstrated that AI demand is far from peaking. Jensen Huang dismissed the idea of an AI bubble, noting that nearly every sector, along with agentic AI, requires Nvidia GPUs. His earlier remark that reasoning models need 100 times more computing power than non-reasoning models has also been validated by the surge in GPU demand and Nvidia's rising market value. His credibility continues to grow. AI is still early in its adoption across industries, far too early to declare the trend exhausted. Even after this year's rally, Nvidia's price-to-earnings ratio near 45 does not indicate extreme exuberance.

In conclusion, the BTC-driven sell-off and stretched technicals suggest that a short-term rebound may arrive soon. With macro conditions supportive and AI fundamentals intact, buying dips in tech remains a compelling thesis. Volatility may persist in the short run, but investors should stay confident, as each pullback brings new opportunities.