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Artificial intelligence stocks, which have driven much of the market’s rally in 2024, fell on Monday as fears of a U.S. recession sparked a global sell-off on Wall Street and continued growing concerns about the return on investment on AI spending.
The sector’s decline came after a disappointing July jobs report released on Friday stoked fears of a recession and raised concerns that the Federal Reserve was slow to cut interest rates to stimulate the economy. Highly valued AI stocks were among the first to be dumped from portfolios as investors became more risk-averse.
“The demand is there, but we’re not seeing the outrageous price action that’s going to keep these stocks going higher,” said Jay Woods, chief global strategist at Freedom Capital Markets. “We had a lull, and now external factors have added a bit of uncertainty. What we’re seeing now is a correction.”
NVIDIA and Super Microcomputer They were down 6% and 2%, respectively, after dropping 14% before the open. As of Monday’s open, Nvidia was down more than 30% from its peak, and Supermicro had already lost more than half of its market cap.
The infection spreads to a wider area, VanEck Semiconductor Index Shares fell nearly 3%, following a 5.5% drop on Friday.The Jefferies trading desk noted that earnings in the sector also got off to a “less encouraging start.” Taiwan Semiconductor Manufacturing and Micron Technology It decreased by about 4%. Broadcom It fell by more than 3%. Arm Holdings It plummeted by 8%.
Mega-cap tech stocks were also sold off. alphabet, Meta Platform, Amazon and Microsoft Each fell by more than 3%. Tesla Decreased by 4.5% apple The stock fell 5.5%. Warren Buffett’s Berkshire Hathaway said over the weekend it had sold nearly half its stake in the iPhone maker. The Round Hill Magnificent Seven ETF fell more than 4%.
Major technology stocks, with the exception of Nvidia, had a busy earnings week last week, with some reporting weak capital spending and other spending that fueled skepticism that big investments in AI are taking longer than expected to pay off.
“The AI tailwind is starting to fade altogether as investors start to lose patience with monetization timelines,” UBS strategist Maxwell Grinacoff wrote. “We’ve previously warned that concentration risk in this theme is growing, with everyone from electrification companies to copper miners to data centers getting caught in the crossfire.”
The Information also reported over the weekend that Nvidia will delay the launch of its latest AI chips by three months, a move that could affect major clients like Meta Platforms and Microsoft. Investors appeared to buy Advanced Micro Devices on the news, sending the stock up more than 3%.
Monday’s sell-off came on the heels of a volatile July for technology stocks, with Nvidia, Alphabet and Meta Platforms all falling more than 5%, while Microsoft fell more than 6%.
