Tech stocks plunge amid US recession fears

Apple and Nvidia led a plunge in tech shares on Monday, driven by worries over a US recession and a Berkshire Hathaway move to cut its stake in Apple.

The fall is a sharp reversal after months of technology sector rise.
The shares of the so-called "Magnificent Seven"—Alphabet, Amazon, Meta Platforms, Microsoft, and Tesla—tumbled as far as 12.2 per cent in premarket trading.

This rout in the marketplace had a spillover effect, wiping out a total of nearly $1 trillion in market value from these companies.

Chip stocks, some of the big winners in Wall Street's rush to invest in companies hitched to the AI wagon, also dropped sharply, with declines of up to 10.3 per cent in Advanced Micro Devices, Intel, Super Micro Computer, and Broadcom.

The widespread selling came after Friday's soft US payrolls report, which nudged investors toward shelter and ratcheted up expectations the Federal Reserve could soon lower interest rates to bolster economic growth.

Berkshire Hathaway said over the weekend it had cut its stake in Apple, its biggest holding, in half, raising concerns about the prospects ahead for the technology sector.

Nvidia shares were also hit by a report that the launch of its new AI chips could be pushed back three months due to design flaws.

If there is a delay, this could affect important customers such as Meta, Google's Alphabet, and Microsoft.

Large technology stocks, which had been driving up the gains on Wall Street for over a year, are under pressure.

This is partly due to indications that the payoff from heavy investments in artificial intelligence may not materialise as soon as some investors hoped.

Reports from Amazon, Microsoft, and Alphabet, the three largest cloud-computing service providers, crushed expectations of seeing AI investments translate quickly into heavy growth.

Dan Coatsworth, an investment analyst at AJ Bell, said: "Expectations have arguably become too high for the so-called Magnificent Seven group of companies. Their success has made them untouchable in the eyes of investors and when they fall short of greatness, out come the knives".
This upheaval in technology reflects more comprehensive market anxieties as investors struggle to understand mixed signs from the economy while simultaneously trying to reassess their strategies amid rising fears of recession.