Market rout punishes mega-cap tech

As U.S. markets opened for trading on Monday, tech’s mega-cap companies lost about $1 trillion in market cap, deepening a downturn that sent the Nasdaq into correction territory last week.

Nvidia shed more than $300 billion in market cap at the opening bell, though it quickly recovered about half of its loss. Shares of the chipmaker were down 7% just after 10 a.m. ET. Apple and Amazon’s valuation plummeted $224 billion and $109 billion, respectively, at the market open

Add all that to steep declines in Meta, Microsoft, Alphabet and Tesla, and the the seven most valuable tech companies lost $995 billion in the early moments of trading. They bounced back some as trading progressed.

Markets fell broadly on Monday, as concerns about a recession stemming from disappointing economic data last week pushed Japan’s Nikkei 225 down 12% on Monday, its worst day since the 1987 Black Monday crash on Wall Street. Bitcoin plummeted 11%, leading a selloff in cryptocurrency and related stocks.

Within technology, investors have been getting nervous for weeks. The Nasdaq slumped 3.4% last week, wrapping up its worst three-week stretch in two years. Amazon, Alphabet and Microsoft all gave Wall Street reasons for concern in their reports, contributing to a slide among their peers.

It’s a sharp change from a few months ago, when investors cheered as Meta CEO Mark Zuckerberg and Google CEO Sundar Pichai both said their companies were spending heavily to build out their artificial intelligence infrastructure.

Nvidia, a company unknown to most Americans, was the biggest beneficiary due to its graphics processing units (GPUs) powering the AI boom. The company surpassed $3 trillion in market cap and briefly passed Microsoft and Apple to become the world’s most valuable company. Its market cap now sits below $2.5 trillion.

Some analysts have been sounding the alarm of late regarding a potential overinvestment in AI.

A widely-read Goldman Sachs note from June warned that the biggest-spending companies had little to show for their AI expenditures. Elliott Management, one of the largest hedge funds in the world, reportedly told clients that Nvidia was in a “bubble” and the AI frenzy was “overhyped.”

Nvidia reports earnings later this month. The company has generated revenue growth in excess of 200% for the past three quarters.

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