Due to investors selling off shares of tech companies, the U.S. financial market experienced a significant drop, with artificial intelligence (AI) stocks particularly hard hit.
In Wednesday’s (July 25th) trading session in New York, the S&P 500 index fell by 2.3%, the tech-heavy Nasdaq index dropped by 3.6%, marking the largest single-day decline since 2022. The Dow Jones Industrial Average also declined by 1.2%.
Major tech companies including Nvidia, Alphabet, Microsoft, Apple, and Tesla all suffered losses. Tesla plummeted by 12%, Nvidia dropped nearly 7%, and Google fell by 5%.
Nvidia, a leading AI chip giant, has been a major beneficiary of the AI boom, saw its stock price drop by 6.8% on Wednesday. Over the past two weeks, its stock price has fallen by about 15%. The company is set to release its earnings report at the end of August.
Elon Musk’s electric car manufacturing company Tesla reported a more than 12% drop in its stock price, disappointing investors.
Google and YouTube’s parent company Alphabet witnessed a 5% decline in its stock price. Earlier in the week, the company’s financial performance exceeded analyst expectations, but indicated that its expenses would remain high for the rest of 2024.
Previously, tech stocks, especially those related to AI, were driving much of the stock market gains this year.
As for the catalysts behind the tech stock plunge, on one hand, Tesla and Google stumbled in the debut Q2 earnings season for U.S. tech’s “Seven Sisters,” while on the other hand, a series of data released on the same day suggested that the U.S. economy might be heading towards an inevitable “hard landing.”
According to Wall Street News, Citigroup’s latest research indicates that the current U.S. economy may be at a turning point. If the labor market continues to be weak, it could trigger the recession that economists have been warning about. Traditional economic recession indicators such as temporary employment rates and yield curves have been reliable predictors in the past, but their reliability seems to be in question in the current economic environment.
In Asia, the Nikkei Index led the decline on Thursday, falling by over 3%. Japanese chip manufacturers Renesas Electronics and Tokyo Electron, along with South Korean company SK Hynix, were among the top decliners.