A months-long rise powered by excitement about artificial intelligence was further deflated on Monday as Apple and other heavyweight businesses fell off amid worries about the U.S. recession and Berkshire Hathaway’s selling of half of its stock in the iPhone maker.
TakeAway Points:
- Fears of a U.S. recession and Berkshire Hathaway’s selling of half of its investment in the producer of the iPhone caused Apple and other heavyweight businesses to sell off on Monday, further deflating a months-long surge powered by excitement about artificial intelligence.
- The seven corporations involved were on track to lose about $800 billion in stock market value for the session, according to LSEG data.
Significant decline in stock
Apple, Tesla, Alphabet, and Amazon each dropped more than 4%, while Nvidia tumbled 7%, and Microsoft and Meta Platforms fell 3% as worries about a potential U.S. recession compounded investor concerns about massive spending to build AI infrastructure.
Those seven corporations were on track to lose about $800 billion in stock market value for the session, according to LSEG data.
“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, said.
Chip stocks tumbled broadly, with PHLX semiconductor down 2.6%, bringing its loss in the past three sessions to 14%.
A third straight day of heavy selling across Wall Street followed a weak U.S. payrolls report on Friday that pushed investors across the globe to safe assets and spurred bets that the Federal Reserve will have to move quickly to cut interest rates to avoid a recession.
Concerns over Tech Industry
Over the weekend, Warren Buffett’s Berkshire Hathaway said it had halved its stake in Apple, the conglomerate’s top holding, raising worries about the outlook for the tech industry.
Also hitting Nvidia, the Information and Financial Times reported on design flaws and production hiccups that could delay the launch of the chip designer’s new AI processor.
After driving gains on Wall Street for more than a year, big technology stocks have faced pressure in recent weeks over worries that building AI-optimized data centers is turning out to be more costly than expected, and that the payoff from that spending could take longer to realize.
Shares of Amazon, Microsoft, and Alphabet—the three biggest providers of cloud-computing services—have fallen recently after their earnings reports sowed doubts that their margins could take a hit from the billions of dollars being spent on AI.
Despite the sell-off, Nvidia shares have nearly doubled in value this year. Following recent sales, Microsoft and Amazon remain up 5% in 2024, and Apple is up 7%. Tesla has dropped 21% year to date.
Effect on market
Some analysts said Monday’s slide could provide investors with an opportunity to buy Big Tech shares at more attractive valuations, pointing to the expected long-term returns from their AI investments as well as their strong market positions.
“Our playbook for 24 years covering tech stocks on the street is that we handhold investors through the panic and irrational global sell-offs to own the best tech names and winners driving the growth themes,” said long-time tech bull Dan Ives, who is an analyst at Wedbush Securities.
