Nvidia Sneezed, AI ETFs Shivered — Is This The Correction Investors Wanted?

Author: Chandrima Sanyal | November 18, 2025 12:06pm

Tech stocks may have faced a rough patch last week, but Wall Street experts are advising long-term AI investors to channel their inner Zen master: breathe, ignore the noise and absolutely do not panic-sell that NVIDIA Corp (NASDAQ:NVDA), just because it sneezed.

Last week's decline followed a shift away from the AI leaders of 2025, which diminished expectations for a rate cut in December and left lingering negative sentiment after the longest U.S. government shutdown ever. However, strategists speaking to Yahoo Finance believe the drop is just routine profit-taking, not a sign of trouble for the AI sector.

For ETF investors, this shakeout is reshaping where the best opportunities are.

AI Concentration Takes A Hit, Pulls Big Tech ETFs Down With It

The ETFs most affected were those heavily invested in top AI companies are Invesco QQQ Trust (NASDAQ:QQQ) and Vanguard Information Technology Index Fund ETF (NYSE:VGT) have significant holdings in Nvidia, Microsoft Corp (NASDAQ:MSFT), Alphabet, Inc (NASDAQ:GOOGL) and Meta Platforms, Inc (NASDAQ:META). iShares Semiconductor ETF (NASDAQ:SOXX) and VanEck Semiconductor ETF (NASDAQ:SMH), both focused on semiconductors, are even more at risk since Nvidia can account for over 20% of their weight.

So, when AI giants faced challenges, these ETFs were bound to drop. QQQ dropped 5%, VGT slipped more than 6%, SOXX slid 8%, and SMH lost more than 7% in the past five days.

Alex Morris, CEO and CIO at F/m Investments, told Yahoo Finance it's "a simple math equation," explaining that with a strong focus on AI, when they start to falter, the average will naturally fall more than you might expect.

That's why equal-weight ETFs like Invesco S&P 500 Eql Wght ETF (NYSE:RSP) and Direxion NASDAQ-100 Equal Weighted Index Shares (NASDAQ:QQQE) are a relatively safer way to play AI via ETFs. By reducing the impact of megacap stocks, these allow smaller AI-related names, including those in cloud, cybersecurity and enterprise software, to have more influence. With nine of the S&P 500's 11 sectors showing earnings growth from last year, according to FactSet, these diversified ETFs might offer more balance than traditional tech-heavy funds.

Software And Cybersecurity ETFs Look Like AI's ‘Second Wave'

Per Yahoo Finance, Jeff Krumpelman, chief investment strategist and head of equities at Mariner Wealth Advisors, said that this pullback highlights chances that have been overlooked. His team believes in holding steady, arguing that AI is still in the early stages.

Where he sees value now is in beaten-down software and cybersecurity.

This shifts the focus to ETFs such as iShares Expanded Tech-Software Sector ETF (BATS:IGV) (software), WisdomTree Cloud Computing Fund (NASDAQ:WCLD) (cloud computing), First Trust NASDAQ Cybersecurity ETF (NASDAQ:CIBR) and Global X Cybersecurity ETF (NASDAQ:BUG) (cybersecurity). ServiceNow Inc (NYSE:NOW), down about 20% this year, is one example of a discounted AI-related stock that is now looking like an attractive long-term option.

Earnings Strength Is Still The Market's Backbone

Even with the ups and downs, earnings stay strong. Barclays reported that S&P 500 net margins reached a 25-year high at 14.2%. According to FactSet, 82% of companies have surpassed EPS expectations, with blended third quarter earnings growth at 13.1%.

This Week's Catalyst: Nvidia

Nvidia’s upcoming earnings on Nov. 19 will decide if this turbulence quickly fades or deepens. For ETFs heavily invested in NVDA — SMH, SOXX, QQQ and VGT — the stakes are high.

For now, strategists maintain that the long-term AI narrative remains solid. For ETF investors, this dip may be the opportunity they have been waiting for.

Read Next:

• Cloudflare Stumbled — And Tech Stocks Extend The Sell-Off

Photo: Shutterstock

Posted In: BUG CIBR GOOGL IGV META MSFT NOW NVDA QQQ QQQE RSP SMH SOXX VGT WCLD