What’s behind the tech market selloff?
One culprit was Buffett's Berkshire Hathaway, which nearly halved its holdings
of Apple Inc. over the weekend in a $75.5 billion stock unloading. This was
likely for tax reasons. (Buffett said Apple is an "even better" business than
Coca-Cola, an old favorite.) But the move revealed how reliant the global tech
industry is on the iPhone maker. Shares of Apple's major suppliers dropped
drastically on Monday. Taiwan's stock index had its worst day since 1967.
Others blamed Japan's central bank for hiking interest rates, triggering a local rout. Jittery Japanese stocks added to last week's concerns about sluggish US economic figures, and the selloff went global. Analysts even dropped the p-word. "Markets are in a meltdown, and there's a lot of panic selling now," said Kyle Rodda, a senior market analyst at Capital.com.
The selloff in tech stocks started last week. Photographer: David Dee Delgado/Bloomberg
The tech sector was particularly primed for a meltdown. Over the past two years, Wall Street has been in love with the "Magnificent Seven," the moniker for tech's giants: Amazon.com, Apple, Meta, Microsoft, Nvidia, Tesla and Google parent Alphabet. In January, the companies accounted for almost a third of the S&P market capitalization. The next month Deutsche Bank estimated that, if the seven merged, they would create the world's second-largest stock exchange.
All those companies have grown on the promise of huge payoffs for artificial intelligence. Last week, the bloom began falling off the rose. Shares of Alphabet, Amazon and Microsoft all fell after the companies reported even more spending on the technology with little to show for it commercially. Tesla's "Full Self-Driving" mode keeps resulting in deadly crashes and regulatory probes. Nvidia's shares sank after a report that its AI chip was delayed. Apple's closely watched new AI features are delayed, too. When it comes to AI, another analyst said, "Investors are entering a 'show me' phase."
Those same investors, of course, could have seen another issue with so few businesses carrying so much of the stock market. In Deutsche Bank's February report, its analyst wrote that the concentration of shareholding in the Magnificent Seven was "rivaling 2000 and 1929 in terms of being its most concentrated in history."
Others blamed Japan's central bank for hiking interest rates, triggering a local rout. Jittery Japanese stocks added to last week's concerns about sluggish US economic figures, and the selloff went global. Analysts even dropped the p-word. "Markets are in a meltdown, and there's a lot of panic selling now," said Kyle Rodda, a senior market analyst at Capital.com.
The selloff in tech stocks started last week. Photographer: David Dee Delgado/Bloomberg
The tech sector was particularly primed for a meltdown. Over the past two years, Wall Street has been in love with the "Magnificent Seven," the moniker for tech's giants: Amazon.com, Apple, Meta, Microsoft, Nvidia, Tesla and Google parent Alphabet. In January, the companies accounted for almost a third of the S&P market capitalization. The next month Deutsche Bank estimated that, if the seven merged, they would create the world's second-largest stock exchange.
All those companies have grown on the promise of huge payoffs for artificial intelligence. Last week, the bloom began falling off the rose. Shares of Alphabet, Amazon and Microsoft all fell after the companies reported even more spending on the technology with little to show for it commercially. Tesla's "Full Self-Driving" mode keeps resulting in deadly crashes and regulatory probes. Nvidia's shares sank after a report that its AI chip was delayed. Apple's closely watched new AI features are delayed, too. When it comes to AI, another analyst said, "Investors are entering a 'show me' phase."
Those same investors, of course, could have seen another issue with so few businesses carrying so much of the stock market. In Deutsche Bank's February report, its analyst wrote that the concentration of shareholding in the Magnificent Seven was "rivaling 2000 and 1929 in terms of being its most concentrated in history."
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