"Everyone's Fleeing": Tech Stocks See a Massive Sell-Off; Nasdaq Falls 2.5%
October turned out to be a tough month for AI investors / Photo: Shutterstock.com
Investors in the stock market are poised to end October with a sharp sell-off in tech stocks: the Nasdaq Composite Index plummeted 2.5% at the start of trading on Friday. Oninvest will be monitoring developments in this live feed.
14:31 CET: Trading opened in New York:
The Nasdaq Composite Index, which is heavily weighted toward technology companies, fell 2.5% at the start of trading on Friday amid disappointing quarterly earnings reports and investor doubts about the return on investment in artificial intelligence;
Shares of chipmaker Intel plummeted 27% after the company’s revenue forecast fell short of market expectations. Amazon’s shares fell by more than 5% due to rising capital expenditures. Together, Amazon and Intel risk losing about $300 billion in combined market capitalization if the decline continues until the market closes, according to Reuters’ calculations.
The S&P 500 broad-market index fell 1.3% at the start of trading;
The Dow Jones Industrial Average, a "blue-chip" index, fell 0.2%;
The sell-off also affected the cryptocurrency market: Bitcoin fell below $77,000 after Binance, the world's largest cryptocurrency exchange, reported a record-breaking hack.
2:45 p.m. CET: Hyperscalers—Amazon, Alphabet, and Meta—were behind the latest wave of tech stock sell-offs, according to Yahoo Finance. The companies that reported earnings this week did not provide Wall Street with clear forecasts on how much they intend to spend on AI infrastructure this year and next, and current spending is turning out to be much higher than expected—and is already beginning to impact the core businesses of these tech giants.
Jefferies analyst Brent Till noted that investors were spooked by financial results that were good but not outstanding. According to him, the market is also increasingly concerned that constraints in physical infrastructure construction are preventing hyperscalers from meeting all the demand. “The tech sector is in a slump. We’re seeing a massive sell-off; everyone is rushing out now. We don’t know if the ‘Closed’ sign will stay up for 10 minutes, 20 minutes, or longer,” the FT quotes him as saying.
14:55 CET: Intel’s stock has already fallen 29%—this plunge could be the worst in the company’s history, according to Bloomberg. Following the weak outlook the company issued when it released its quarterly report yesterday, Bank of America has withdrawn its “buy” recommendation and now maintains a “neutral” rating, according to CNBC. Analyst Vivek Arya lowered his price target from $145 to $100, which implies upside potential of about 9% relative to Thursday’s closing price.
“The company has not yet demonstrated sufficient progress in attracting third-party customers for contract chip manufacturing. At the same time, the strong performance of the data center division is being offset by an unexpectedly sharp decline in PC shipments,” the analyst wrote.
2:02 p.m. CET: What analysts are saying about the decline in tech stocks:
“I don’t think we’ve reached the moment of truth yet, but investors should seriously consider just how overvalued positions in this sector remain,” said Matt Orton, chief market strategist at Raymond James, on CNBC. “Although what’s happening now may be painful for investors, the fundamentals remain strong overall, especially for companies that are benefiting from capital expenditures on AI.”
"Continued volatility does not make exiting the market an effective way to protect a portfolio from potential drawdowns. We continue to see upside potential for stocks overall and believe investors should build a well-balanced portfolio that includes assets outside the technology sector,” said Ulrike Hoffmann-Burkhardi of the UBS Chief Investment Office (source: Bloomberg).
"The market is much more sensitive right now than usual," said Chris Zaccarelli, chief investment officer at Northlight Asset Management. Investors prefer to sell their stocks and figure things out later—rather than get stuck holding them and watch their losses mount, he noted (Bloomberg).
“The main question remains whether the weakness in the technology sector will spread to the entire market or whether the ‘musical chairs’ game will continue. A sell-off in which all assets fall simultaneously has so far been avoided, but, in our view, the likelihood of such a scenario has increased in November,” wrote Jonathan Krinsky, chief technical analyst at BTIG, in a note (Bloomberg).
15:09 CET: As investors shifted from tech stocks to other sectors, defensive sectors posted gains: shares of consumer staples and healthcare companies, CNBC noted. For example, shares of Procter & Gamble, Walmart, and Coca-Cola each rose by about 2%. Shares of Johnson & Johnson and Merck, in turn, rose by 1.4% and 2.8%, respectively.
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This article was AI-translated and verified by a human editor
