Traders work on the floor at the New York Stock Exchange in New York City, US. Photo: Reuters
Apple and Nvidia led a sell-off in technology stocks on Monday as US 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 shares of Alphabet, Amazon, Meta Platforms, Microsoft and Tesla, as well as Apple and Nvidia, fell as much as 6.5%.
The losses in the Magnificent Seven stocks were set to wipe out nearly $900 billion (R16.6 trillion) from the combined market value of the companies.
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 7.8%.
The Philadelphia Semiconductor Index was down nearly 3%.
The share slide followed a weak US payrolls report on Friday that pushed investors across the globe to safe assets and spurred bets that the Federal Reserve will have to soon cut interest rates to aid growth.
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.
Berkshire’s results released on Saturday suggest the 93-year-old Buffett, one of the world’s most revered investors, is growing wary about the broader US economy, or stock market valuations that have got too high.
“If you look at the entire Berkshire picture and the macroeconomic data, a safe conclusion is that Berkshire is getting defensive," said Cathy Seifert, an analyst at CFRA Research who rates Berkshire a ”buy“.
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 pay-off 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 in recent weeks as their earnings reports sowed doubts that their margins could take a hit from the billions of dollars being spent on AI.
"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.
Despite the sell-off, Nvidia shares have nearly doubled in value this year after rising more than 200% in 2023. Other Magnificent Seven stocks except Tesla are also in positive territory for 2024.
Some analysts said Monday’s slide could provide investors an opportunity to buy shares of the big technology firms at better valuations, pointing to the expected long-term returns from genAI investments, as well as their strong market positions.
“Our playbook for 24 years covering tech stocks on the Street is 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.
REUTERS