The recent trading day saw a significant decrease in market cap for tech’s megacap companies in the U.S. Nvidia alone lost over $300 billion, only to recover about half of that initial loss. Apple and Amazon also experienced substantial declines in valuation, leading to an overall loss of $995 billion for the seven most valuable tech companies.
The market as a whole experienced a broad decline on Monday, sparked by concerns about a looming recession due to disappointing economic data. This led to a 12% drop in Japan’s Nikkei 225, marking its worst day since the 1987 “Black Monday” crash. Additionally, Bitcoin plummeted by 11%, triggering a sell-off in cryptocurrency and related stocks.
Within the technology sector, investors have been on edge for weeks. The Nasdaq suffered a 3.4% drop last week, completing its worst three-week stretch in two years. Companies like Amazon, Alphabet, and Microsoft fueled concerns on Wall Street through their recent reports, contributing to a general decline in the tech industry.
Nvidia, a company less familiar to the average American, experienced a meteoric rise in market cap thanks to its GPUs powering the AI boom. At one point surpassing $3 trillion, Nvidia briefly overtook tech giants like Microsoft and Apple to become the most valuable company in the world. However, its market cap has since dropped below $2.5 trillion, leading some analysts to caution against potential overinvestment in AI.
Goldman Sachs released a note in June highlighting concerns about companies overspending on AI without seeing substantial returns. Elliott Management, a major hedge fund, labeled Nvidia as being in a “bubble” and criticized the AI frenzy as being “overhyped.” With Nvidia set to report earnings later in the month, the industry will be closely watching to see if the company can sustain its impressive revenue growth.
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