Wells Fargo analyst Christopher Harvey said in a note Wednesday that he believes the recent sell-off in mega-cap tech stocks could be nearing its end, citing a combination of factors that may ease selling pressure and improve market sentiment.

Harvey noted that rebalancing flows from passive index funds intensified the recent selling by forcing reductions in holdings of the largest tech companies.

“Russell will introduce weighting limits on the six largest issuers in the R1000 Growth index: Apple (NASDAQ:AAPL), Microsoft, Nvidia, Amazon (NASDAQ:AMZN), Meta (NASDAQ:META), and Alphabet (NASDAQ:GOOG/L). According to estimates from our trading desk, passive index investors will sell approximately $6.7 billion,” the Wells Fargo analyst wrote.

However, this rebalancing is expected to conclude by Friday, potentially removing a key source of selling pressure. “We anticipate this event will mark the end of the overhang,” the bank added.

Although the market has faced uncertainty, Wells Fargo expects sentiment to improve as clarity emerges around macroeconomic factors.

“We expect a relatively calm day for stocks, but with improving sentiment due to: (1) increased clarity, which typically helps; and (2) the elimination (on Friday) of the looming threat posed by the reduction in mega-cap weightings in the R1000 Growth index,” Harvey stated.

Additionally, the bank believes certain AI-related growth stocks, which suffered significantly during the broader market correction, are now approaching more reasonable valuations.

“In the current Nasdaq correction, former leaders have been hit particularly hard as momentum factors weakened. However, we now note that we are nearing market multiples for a basket of secular growth stories with AI exposure,” Wells Fargo concluded.