Last week saw the largest tech sell skew in more than 5 years, Jefferies says

Jefferies' equity trading desk saw its most heavily selling-tilted tech trading week in more than five years, analysts said over the weekend, putting a finer point on the CoreWeave-led tech sell-off that dominated markets last week.

"Simply put, there's a tremendous amount of angst in the market right now, and from our conversations and flows, there's been a very consistent and violent de-gross occurring over the last several sessions," Jeffrey Favuzza, TMT equity strategist at Jefferies, wrote to clients.

By market close on Friday, the week's skew in tech equities had reached $7.5 billion in net selling activity — a significant jump over the $5.5 billion skew ahead of the opening bell on Friday and a testament to heavy selling into the weekend.

The jump in outflow activity was enough to push the week's skew past that of the "DeepSeek moment" week in January 2025, when the Chinese AI lab released its open-weight DeepSeek model and set off a flurry of concerns that US labs would see their revenues fall as enterprises turned to cheaper foreign options, the analysts said.

Selling activity through Jefferies' equity trading desk was most concentrated last week in semiconductors, memory, hardware, and communications equipment subsectors, Favuzza noted, while only horizontal software and IT/info services subsectors saw a notable buy skew on the week.

That split matched activity in the wider market, where the Nasdaq Composite ( ^IXIC ) fell by roughly 3% while the Philadelphia Semiconductor index ( ^SOX ) lost 10%.

Much of the problem, Favuzza noted, lies with an increasingly sketchy financing picture. Part and parcel of the AI boom is the explosion in capex across the sector, with capex by hyperscalers alone expected to exceed $800 billion in 2026 and cross $1 trillion next year.

That spending has collided with a range of factors — the war in Iran, growing US debt , trade turmoil — that have pushed the international bond complex into a deep sell-off, sending yields on government debt from the US and other nations to multi-decade highs "at the same time that the hyperscalers have flooded the market with paper this year."

Last week's sell-off was largely catalyzed by spiking credit risk and worries about the worthiness of debt issuance at CoreWeave ( CRWV ), a so-called neocloud that's heavily backed by Nvidia ( NVDA ).

"While the underlying demand for the Neos hasn't downticked," Favuzza wrote to clients, "the confidence in some of their access to cheaper capital has."

The tech trade has also lost some of the momentum-driven wind in its sails, Favuzza said, arguing that "we never recovered, both from a price and conviction standpoint, from the Momentum meltdown of the summer." Not only was last week the worst in more than five years by sell skew, but it was also the second-worst week for the tech momentum pair (buying winning tech stocks while selling losers) in more than 20 years, beaten out only by a COVID-19 sell-off.