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Technology stocks endured their steepest decline since late 2022 on Wednesday, with nearly 75% of Nasdaq 100 constituents slipping into the red.
The Nasdaq 100 — tracked by the Invesco QQQ Trust (NASDAQ:QQQ) — dropped 3.6%, marking its fifth decline in six sessions and the sharpest one-day drop since October 2022.
The tech-heavy index fell below its 50-day moving average for the first time since early May. It mostly stayed above this key support level since late October 2023, barring a brief two-week period between April and May.
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Shares of Alphabet Inc (NASDAQ:GOOG), the parent company of Google, plummeted 4.9% due to higher-than-expected AI spending and disappointing YouTube ad revenue.
Tesla Inc. (NASDAQ:TSLA) shares tumbled 12% following a 7% drop in auto revenue, a profit miss, and delays in the Robotaxi project.
Chip stocks also suffered, with Nvidia falling 6.2%, Broadcom Inc. (NASDAQ:AVGO) losing 7.6%, and Arm Holdings plc (NASDAQ:ARM) sinking 8.2%.
The Magnificent Seven, tracked by the Roundhill Magnificent Seven ETF (NYSE:MAGS), plunged 5.8%. This marks the worst daily performance since the fund’s inception. Collectively, the seven tech giants wiped out nearly $700 billion in market value in a single session, with Nvidia Corp. (NASDAQ:NVDA) alone shedding $180 billion.
Chart: Nasdaq 100 Falls Below 50-Day Moving Average, QQQ Marks Worst Day Since October 2022
The key question now is whether the tech-led bull market is over or the AI bubble is bursting. Investors have also been rotating out of tech since July 11, according to veteran Wall Street investor Ed Yardeni.
The lower-than-expected CPI in June prompted investors to pile into interest-rate-sensitive stocks.
“We agree with that expectation,” Yardeni said, “but we also think it could be a one-and-done rate cut for 2024 because the economy remains resilient.”
“For now, we believe that the stock market was overbought and is experiencing a minor selloff,” he added.
On July 16, the S&P 500 was 15% above its 200-day moving average. Historically, such levels have often preceded 10%-20% corrections or more significant declines during recessions.
This time, the selloff doesn’t seem linked to widespread recession fears, Yardeni says. After all, the Fed is poised to potentially lower interest rates in September.
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