Shares of big technology companies fell sharply on Monday morning amid a broader market sell-off.
Nvidia was the biggest faller among the Magnificent Seven tech stocks, opening 14.2% down from Friday’s closing price. Tesla opened down 10.9%, Apple was down 9.6% and Amazon was down 8.2% at the start of trading.
Meta, the parent company of Facebook and Instagram, opened down 7.6%, while Google parent Alphabet fell 6.8%. Microsoft was the least volatile of the major tech stocks, dropping 4.8% at the start of trading on Monday.
Shares in all seven companies had recovered slightly by midday but were still down.
Tech stocks’ sharp drop on Monday morning came amid a broader market sell-off amid growing fears of a recession. Investors were spooked by Friday’s weaker-than-expected jobs report, which showed the number of U.S. employees rose by just 114,000 and the unemployment rate rose to 4.3%.
The Dow Jones Industrial Average opened down 1,100 points, or 2.8%, on Monday, while the Nasdaq Composite Index fell 6.2% and the S&P 500 Index was down 4.2% after the market opened.
“Yesterday’s weak jobs report has stoked fears of the R-word, raising concerns that the Fed is too late in its rate cutting cycle, fuelling worst-case panic selling in tech stocks with tech stocks at the epicenter of this Category 5 storm of selling,” analysts at Wedbush Securities wrote in a research note on Saturday.
Already on edge after a string of mixed second-quarter earnings reports over the past two weeks, major tech stocks are also being reeled from Warren Buffett’s decision to cut Berkshire Hathaway’s stake in Apple in half.
But in a separate note on Monday morning, Wedbush analysts argued that now is “not the time to panic on tech trades.”
“We have been inundated with inquiries from investors around the world today/over the weekend asking if this tech bull market and historic rally in tech stocks is over,” they wrote. “In our view, it is not and this is simply a moment of tension in a multi-year tech bull market that needs help.”
The technology sector has driven much of the market’s rally this year amid growing excitement about the potential of artificial intelligence, with the Magnificent Seven accounting for 75% of the S&P 500’s gains as of late June, according to Axios.
But tech stocks have also been a drag on the market in recent weeks, with both the S&P 500 and Nasdaq Composite Indexes falling to their lowest levels in several weeks after Alphabet and Tesla reported lackluster earnings in late July.
Despite the current selling pressure, John Higgins, chief market economist at Capital Economics, is skeptical that the AI-driven market rally is over.
“It feels more like 1998, when stock prices were down and the yen was strong, than it does like 2000 when the dot-com bubble burst,” Higgins said in his analysis on Monday.
“Still, there’s a big difference between now and 1998: the absence of major problems or risks in the U.S. financial system,” he continued. “Our biggest expectation is that the economy will hold up better than feared and the stock market will recover as investors rediscover their enthusiasm for AI.”
