NICKIE LOUISE FROM TECH STARTUPS
Apple and Nvidia led a sell-off in technology stocks on Monday as U.S. recession fears and Berkshire Hathaway’s decision to cut its stake in the iPhone maker punctured a months-long rally in the sector.
High-performing tech companies, often called the “Magnificent Seven” – Apple, Nvidia, Alphabet (Google), Amazon, Meta (Facebook), Microsoft, and Tesla – are experiencing a dramatic downturn. Their shares fell as much as 12.2% in premarket trading on Monday.
The losses in the Magnificent Seven stocks were set to wipe out nearly $1 trillion from the combined market value of the companies. These tech giants, which have collectively driven much of the stock market’s recent gains, are now facing a combined market value loss of a staggering $1 trillion.
Over the weekend, Warren Buffett’s Berkshire Hathaway said it had halved its stake in Apple – the conglomerate’s top holding – in a stock-selling spree that raised worries about the outlook for the tech industry.
Meanwhile, Nvidia shares took a hit from a report that the launch of its upcoming AI chips could be delayed by three months due to design flaws, which could impact customers such as Facebook-parent Meta, Alphabet’s Google, and Microsoft.
Apple and Nvidia have led the decline, with investors growing increasingly cautious about the overall tech sector. Several factors are contributing to this market upheaval. Chief among them is the growing concern over a potential recession, which has dampened investor sentiment. Additionally, there’s a growing belief that the tech sector was overvalued during the recent bull market.
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Magnificent Seven stocks are not alone. Chip stocks, the big winners of Wall Street’s picks and shovels trade for AI, also tumbled, with Advanced Micro Devices, Intel, Super Micro Computer, and Broadcom falling as much as 10.3%.
The share slide followed a weak U.S. payrolls report on Friday that pushed investors to safe assets and spurred bets that the Federal Reserve will have to soon cut interest rates to aid growth.
After driving gains on Wall Street for more than a year, big technology stocks have come under pressure in the past few weeks also on signs that the payoff from hefty AI investments would take longer than some investors had initially hoped.
Shares of Amazon, Microsoft, and Alphabet – the three biggest providers of cloud-computing services – fell as their earnings reports dashed big bets of hefty AI investments translating quickly into growth.
“Expectations have arguably become too high for the so-called Magnificent Seven group of companies. Their success has made them untouchable in the eyes of investors and when they fall short of greatness, out come the knives,” Dan Coatsworth, investment analyst at AJ Bell, told Reuters.
Furthermore, individual companies within the Magnificent Seven are grappling with their own challenges. Supply chain disruptions, heightened competition, and increased regulatory scrutiny are all impacting these tech titans. As the market continues to fluctuate, investors will be closely watching how these companies adapt to the changing landscape.
