Tesla and Google, among the "Big Seven" in the US stock market, were the first to release their quarterly financial reports, but this caused a heavy blow to US technology stocks.
On July 24th local time, the Nasdaq 100 index fell 3.74%, marking the largest daily decline since October 2022; The S&P 500 index fell 2.31%, marking its largest daily decline since December 2022; The Dow Jones Industrial Average fell 1.25%. State Street Bank's Technology Select Industry SPDR Fund (NYSE: XLK) fell over 4%.
All seven giants of the US stock market, including Apple, Amazon, Google parent company Alphabet, Microsoft, Meta, Nvidia, and Tesla, fell, with Tesla falling the most, dropping 12.54% to close at $215.99 per share. Nvidia fell 6.71%, Meta fell 5.62%, Google fell 5.05%, Microsoft fell 3.60%, Amazon fell 2.96%, and Apple fell 2.84%.
On the 24th, the total market value of the "seven giants" evaporated by about 768 billion US dollars (about 5.6 trillion yuan) in a single day, which is the largest market value evaporation of technology giants since the listing of Meta platform (then Facebook) in 2012. The Bloomberg Magnificent 7 Price Return Index closed down 5.88%.
After the US stock market closed the day before, Tesla and Google disclosed their performance. Tesla announced its lowest profit margin in over five years, failing to meet its second quarter profit expectations, and postponed the release of its autonomous taxi Robotaxi from August to October; Google's parent company Alphabet's performance has basically exceeded expectations, but advertising growth has slowed down, and the company has stated that capital expenditures will be relatively high this year.
Dave Grecsek, Managing Director of Investment Strategy and Research at Aspiriant, said, "Some investors choose to take profits and are also concerned about the upcoming financial reports
The abnormal stock price on the 24th may reflect that with the AI (artificial intelligence) boom driving the US stock market to record highs in the first half of this year, the market's expectations for tech giants' financial reports have become very high. Investors are beginning to worry about when large investments in AI (artificial intelligence) will bring returns.
David Lundgren, portfolio manager at Little Harbor Advisors, said that for tech giants, a small performance that exceeds expectations is no longer enough to convince investors that 'you have to significantly exceed expectations'.
Kim Caughey Forrest, founder and chief investment officer of Bokeh Capital Partners, pointed out, "There are signs that tech giants need more time to see investment returns on AI. For me, this is the key to changing the market
The fluctuation of market sentiment has also affected AI supply chain related stocks, including semiconductors and other products. The stock price of Super Micro Computer fell by 9.1%, while Broadcom fell by 7.6%. Qualcomm and AMD respectively fell by over 6%.
Due to the recent heavy blows to US technology stocks, investors are increasingly shifting their funds towards small and medium-sized companies. The Russell 2000 Index, which is considered a measure of small business stock price performance, fell 2.1% on the 24th, but according to Dow Jones market data, its performance over the past 11 trading days was 10.9% higher than the S&P 500 Index, setting the largest gap in 24 years.
John Lynch, Chief Investment Officer of Comerica Wealth Management, believes that the leaders in the US stock market have undergone significant changes recently. Many analysts believe that small companies may benefit from interest rate cuts due to their floating rate debt. According to CME's FedWatch tool, the probability of a September rate cut in US federal funds rate futures has reached 100%.
Jos é Torres, a senior economist at Interactive Brokers, pointed out in a report that various factors are gathering and may lead to a violent correction in the US stock market for a period of time: "Risk aversion sentiment is indeed dominating Wall Street
Without a doubt, after Tesla and Google had a poor start, the financial reports of the other five giants in the "Big Seven" will receive additional attention. Starting from next week, Microsoft will release its financial report on July 30th local time, with a key focus on the performance of its cloud business Azure; Meta will release its financial report on July 31st, with investors focusing on the performance of its advertising business and the challenges posed by European regulatory authorities; Apple will release its financial report on August 1st, and investors will pay attention to the growth momentum brought by new products such as Macbook Air; Amazon will release its financial report on August 1st, and the market is concerned about whether it can drive the slightly sluggish US retail industry. Nvidia will release its financial report on August 28th.