Trillions of dollars have been wiped from the Nasdaq-listed tech giants taking a nosedive amid a global stock sell off, as fears of a US recession are causing investors to run for the hills.
The so-called Magnificent Seven’s combined market capitalisation has taken a blow of at least $2.3t (£1.8t), equal to a 15 per cent loss from July’s $17t (£13.3t) peak, according to AJ Bell analysis.
Disappointing US job growth figures, underwhelming earnings reports from major tech companies and growing concerns over artificial intelligence (AI) have fuelled a sharp sell-off, which started on Friday and has charged straight into the start of this week.
By Monday, many of the major tech stocks were in free-fall. Nvidia plummeted over 13 per cent when the market opened and Apple wasn’t spared either, down as much as seven per cent on Nasdaq and 11 per cent on Frankfurt’s exchange.
The rest of the so-called Magnificent Seven – Meta, Amazon, Microsoft, Alphabet, and Tesla – all took a beating, falling between four and ten per cent in early trading.
Combined, the septuplet still has a valuation of $14.7t (£11.5t), representing a third of the S&P 500’s total valuation and one fifth of global stock market value on their own.
Shares in US chip maker Intel also took a six per cent hit after suffering its biggest drop in half a century over the weekend, losing more than $30bn, after a lacklustre earnings reveal.
It comes as big tech has suffered a bruising quarter. Despite some positive earnings reports, forward guidance looks bleaker and colossal investments in AI are still a gamble that is yet to pay off.
“Meeting expectation isn’t enough when investors have already bought the dream that AI is going to coat everything in a thick veneer of dollar bills,” said AJ Bell head of financial analysis, Danni Hewson. “The problem is that mixing up that veneer comes with its own chunky price tag and no-one wants to get caught out if that spend is scaled back,” she added.
Last week, Elliott Management, one of the world’s largest activist hedge funds, delivered a punch to the stomach as it described AI as “overhyped” and warned that Nvidia is teetering on bubble territory. Warren Buffett’s Berkshire Hathaway added to the gloom, dumping nearly half its Apple shares.
For investors worried about how long the bloodbath could last, Ben Barringer, technology analyst at Quilter Cheviot, said they should expect a volatile few weeks for tech stocks.
“When valuations are as high as they are for the big tech stocks, any blip is likely to cause shockwaves,” he said. “The bigger concern for tech companies, and semiconductors in particular, is that this is a cyclical industry. Demand will impact sales and thus any slowdown will filter through to some of these tech giants.”
But other analysts have said that a breather after a rapid run-up is not necessarily a bad thing.
“Notwithstanding any further shocks, to have let some air out of the tyres after a recent breathless run is usually seen as a healthy corrective measure,” explained Richard Hunter, head of markets at Interactive Investor.
In the year to date, the Dow Jones is still up by 5.4 per cent, the S&P500 by nearly 13 per cent and the Nasdaq by 13.6 per cent, even after the tech sell off.
“There are few reasons at this precise moment to signal an end to the bull market, even if investor sentiment is understandably cautious,” added Hunter.