Stock prices in the AI and technology sector experience a decline, as the summer market rally begins to falter
Tech Stocks Take a Dip Amid AI Concerns and Market Volatility
Tech stocks have experienced a decline this week, with the Nasdaq Composite falling 0.67% on Wednesday and 1.46% on Tuesday. This dip comes amidst concerns about a potential bubble in the AI market and renewed jitters over the sustainability of the AI trade.
The Magnificent Seven tech stocks, which make up 33.5% of the S&P 500's total market value, have also felt the impact. Each of these companies, including Apple (AAPL), Alphabet (GOOGL), Amazon (AMZN), Meta (META), Microsoft (MSFT), Nvidia (NVDA) and Tesla (TSLA), experienced a decline on both Tuesday and Wednesday.
Notably, Palantir (PLTR) and Nvidia (NVDA) both experienced a decline, with Palantir falling 1.1% on Wednesday and Nvidia edging lower by 0.14% on Wednesday. Palantir has been experiencing a series of declines, with shares in Palantir having experienced six consecutive days of decline, including a maximum drop of 9.8% on Wednesday.
Sam Altman, chief executive at OpenAI, expressed concerns about a potential bubble in the AI market, and his comments may have spooked some investors. Jay Hatfield, chief executive at Infrastructure Capital Advisors, stated that he has taken down his exposure to tech in recent months and expected this type of pullback.
Despite the current market conditions, Jay Hatfield remains bullish for the year end. He described Palantir as the poster child for excessive valuation, suggesting that the momentum works in both directions.
Meanwhile, investors are in a wait-and-see mode ahead of a critical day for markets on Friday when Federal Reserve Chair Jerome Powell is set to deliver remarks at the Jackson Hole Economic Symposium.
Interestingly, a report by researchers at MIT detailed how the majority of companies testing new generative AI tools are seeing zero returns. This could potentially add to the concerns about the sustainability of the AI trade.
Despite the tech-heavy index being on track to snap back-to-back weeks of gains, sectors like consumer staples, utilities, and real estate outperformed on Tuesday, with about 70% of stocks in the S&P 500 closing higher.
Ulrike Hoffmann-Buchardi, head of global equities at UBS, stated that investors are rotating out of high-momentum tech stocks due to renewed jitters over the sustainability of the AI trade. Ross Mayfield, an investment strategist at Baird, stated that while the fundamentals are good, the price action of stocks has outpaced them, leading to pockets of profit taking.
As of Tuesday, the broader S&P 500 also fell 0.24% and posted its fourth day of losses in a row. The Dow hovered around the flatline.
Overall, the tech sector is experiencing a period of volatility, with concerns about AI bubbles and profit-taking contributing to the current market conditions. Investors will be closely watching the Jackson Hole Economic Symposium for any indications about the future direction of the market.
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