Earlier this year, Big Tech stocks were soaring, and pulling up the
S&P 500.
They’re dropping now, and taking the market a few rungs.
The S&P 500 had gained 20% from the start of the year through its intraday high for the year hit on July 31. Big Tech handled much of the leg work. Over that time span,
Apple
stock (AAPL) soared over 50%, and
Microsoft
(MSFT) and
Alphabet
(GOOGL) shares saw similar gains; meanwhile
Nvidia
stock (NVDA) more than tripled, and
Meta Platforms
stock (META) more than doubled.
These companies together, with a market value of several trillion dollars, represent a double-digit percentage of the S&P 500’s total value. They were responsible for a large part of the index’s gain, and outperformed most other sectors. Investor and analyst enthusiasm for artificial-intelligence advancements was a big factor. In the case of Apple, which was less of an AI beneficiary, the iPhone maker continued to surpass analyst’s earnings estimates to command its high valuation.
On Thursday, after a reversal of fortune, Big Tech collectively is down by a percentage in the low teens from the shares’ summer peaks. That’s worse than the other S&P 500 sectors, as the index is down about 10% from its summer peak.
That’s partly because of a recent pop in bond yields. Higher long-dated bond yields reduce the value of future profits. Even though Big Tech companies are profitable, they’re still growing, and a large bulk of their profits are expected come many years in the future.
On top of that, Meta’s earnings report this week was slightly problematic for tech and the entire market. To be sure, sales and earnings beat estimates and grew year over year, but the company talked about a potential slowdown in advertising spending, which isn’t a surprise, given that brands could limit marketing budgets as consumer spending is pressured by inflation and higher interest rates. Plus, Meta stock had already made hefty gains ahead of earnings, so some investors have taken profits, pressuring the stock, and other tech names such as Alphabet.
The Big Tech selloff is rippling through the S&P 500. At some point, these stocks will stabilize. Thursday, they’re still awash in red.
Write to Jacob Sonenshine at [email protected]
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