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• 2024-11-03

U.S. Tech Giants Lose $400B in Market Cap

On April 19, local time, the American stock market presented an intricate and divided picture, with the three major indexes resembling ships navigating through different waters, each charting its own course. The S&P 500 index found itself in a downward spiral, sliding 0.88% to close at 4967.23 points. This slip beneath the psychologically significant 5000 mark sent shockwaves throughout the trading floor, as investors grappled with the implications of such a drop. In stark contrast, the Dow Jones Industrial Average managed to climb 0.56%, standing out as a bastion of strength amidst a generally bearish atmosphere. Meanwhile, the Nasdaq Composite Index, predominantly composed of technology stocks, appeared beleaguered and vulnerable, suffering a continuous decline for six trading days, culminating in a staggering 5.52% plunge this week alone—a downturn not seen since November 2022. This stark performance laid bare the myriad challenges currently facing the tech sector, painting a picture of disarray.

A cloud of despair enveloped the tech stock sector, with prevailing sentiment leaning heavily toward declines. Many AI-related stocks bore the brunt of this downturn, contributing to a broader narrative of struggle among the tech giants. The ‘Magnificent Seven’—the leading tech titans—saw their stock prices tumble under the weight of pessimism. Nvidia's shares plummeted by 10%, hitting a two-month low and pushing its market cap below the $2 trillion threshold. The day alone witnessed a staggering evaporation of $211.7 billion in market value—a figurative bombshell that sent ripples through the tech market. Tesla's share price did not escape unscathed either, sinking for six consecutive trading days, down 1.92% to $147.05, marking its lowest share price since January 2022 and suggesting it faced unprecedented hurdles. Other tech behemoths like Apple, Microsoft, Alphabet, Amazon, and Meta also faltered, with respective declines of 1.22%, 1.27%, 1.23%, 2.56%, and 4.13%. Collectively, these seven giants saw a staggering loss of approximately $400 billion in market value, mirroring the turmoil engulfing the entire tech stock market.

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Other notable technology companies suffered declines as well. AMD's stocks fell by 5.44%, resulting in a market cap loss of $13.6 billion and achieving a three-month low in stock prices. Advanced Micro Devices was not alone, as Super Micro Computer crashed by 23.14%, ARM dropped by 16.9%, Micron Technology slid down 4.61%, ASML fell by 3.32%, Netflix took a 9.09% hit, and Broadcom saw a decrease of 4.31%. AI concept stocks, including SoundHound.ai, BigBear.ai, Palantir, and Oracle, plummeted by 7.31%, 5.23%, 3.12%, and 0.97%, respectively, highlighting the pervasive nature of the recent downturn.

According to the data tracking fund flows from EPFR Global, investors withdrew approximately $21 billion from funds invested in the U.S. stock market over the past two weeks as of Wednesday. The potential disruptions included worries that inflation could compel the Federal Reserve to maintain high-interest rates and geopolitical tensions escalating in the Middle East.

Bill Northey, the Chief Investment Officer at U.S. Bank Wealth Management, remarked, "The market is grappling with multiple headwinds. The inflation situation is more severe than the market perceives, perhaps even worse than the Fed anticipates." This statement encapsulated the growing anxieties shared by investors over the current economic landscape and the uncertainties looming ahead.

In other news, Netflix released its earnings report for the first quarter on April 18, revealing revenues of $9.37 billion, marking a 14.8% year-over-year increase, with a net profit of $2.33 billion and a 16% growth in paid memberships. Though these results surpassed market expectations, Netflix cautioned that seasonal factors would lead to lower user growth in the second quarter. Furthermore, they indicated that starting in Q1 of 2025, they would cease disclosing data concerning paid membership growth.

Additionally, Super Micro Computer announced in a press release on Friday that it would unveil its third fiscal quarter results on April 30, forgoing the customary preliminary figures typically shared ahead of such announcements.

Adding to the tumult, news emerged on April 15 that Tesla would be reducing its global workforce by over 10%. CEO Elon Musk informed employees via an internal email that layoffs were necessary to cut costs and enhance productivity, affecting more than 14,000 workers. Analysts interpreted this drastic action as a grim indicator that Tesla might be confronting a challenging period ahead.

Meanwhile, TSMC's president, C.C. Wei, recently adjusted the 2024 growth forecast for the semiconductor industry—excluding memory—to 10%, down from the previous estimates of over 10%. The outlook for the foundry sector was similarly trimmed to a growth range of 14% to 19%, previously projected to be around 20%. Demand for traditional servers remains lukewarm, and the forecast for automotive chips shifted from a “growth” perspective to a “decline” after the previous quarter's analysis.

ASML, a key player in the lithography equipment sector, also released its first-quarter earnings report, showcasing net sales of €5.3 billion—down 27% from the previous quarter—with net profits of €1.2 billion, marking a 40% decline. The gross margin was reported at 51%, slightly down from the previous quarter's margin of 51.4%. ASML revealed a new order intake totaling €3.6 billion for the first quarter, with €656 million attributed to EUV lithography machinery orders—below the market's expectations of €5.1 billion for new orders.