Magnificent seven technology companies lose close to $800 billion in value
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- Massive tech selloff driven by geopolitical risk – The "Magnificent Seven" tech stocks lost nearly $800 billion in value on Thursday, with Tesla hit hardest (down ~14.5%) followed by Google (-7.13%) and Amazon (-4.57%), as escalating U.S.-Iran tensions pushed oil prices toward $100/barrel and rattled broader markets.
- AI investment sustainability is under scrutiny – The selloff reflects a growing market trend of actively questioning whether heavy AI spending by tech companies will actually translate into future cash flow, suggesting further capital outflows are possible if these companies fail to deliver on their AI commitments.
- Mixed sector performance despite the broader dip – While the S&P 500 (-1.23%) and Nasdaq (-1.9%) both fell, defensive and value sectors like Health Care (+1.26%), Aerospace & Defense (+3.08%), and Industrials (+1.73%) actually gained, showing investors rotating away from growth/tech names rather than a market-wide collapse.
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Seven of the largest publicly traded technology companies have lost close to $800 billion in value on Thursday, according to Bloomberg. The update comes as the conflict between U.S. and Iran flares up once again, driving up oil prices to the $100 mark.
Tech equities bled along with the rest of the American stock market as capital allocations become thin towards AI and growth sectors, which right now determine the ebb and flow of the market.
The repeated pattern of selloffs is forming a long-term trend in which the technology companies are now being monitored actively in the market for their heavy investments in AI and these projects are being assessed for their ability to drive future cash flow.
At the time of writing, oil prices were as follows:
- WTI Crude: $90.70 (−1.62%)
- Brent Crude: $99.10 (−1.58%)
- Murban Crude: $105.9 (−1.16%)
- Natural Gas: $2.885 (−1.06%)
The S&P500 fell by 1.23% while the tech-heavy NASDAQ100 dipped by 1.9% reflecting the largest drop among all the stock indexes in America. (Source: TIKR Terminal)
- S&P 500 (SPY): 738.18 (1.23%)
- NASDAQ (QQQ): 691.96 (1.90%)
- Dow Jones (DIA): 516.26 (1.00%)
- Russell 2000 (IWM): 292.09 (0.58%)
The drops across the magnificent seven were as follows:
- GOOGL: $317.69 (-7.13%)
- AAPL: $321.66 (-1.30%)
- AMZN: $233.66 (-4.57%)
- META: $606.10 (-3.36%)
- MSFT: $381.58 (-2.24%)
- NVDA: $208.76 (-1.56%)
- TSLA: $319.69 (-14.52%)
The largest drop was recorded for Tesla which dipped by close to 15% on Thursday, contributing to the drop for the tech sector.
On a sectoral basis, stock ETFs showed a mixed outlook.
- Technology: 178.45 (-1.01%)
- Health Care: 161.44 (+1.26%)
- Real Estate: 44.95 (-0.13%)
- Financials: 55.83 (-0.39%)
- Utilities: 46.19 (+0.57%)
- Communication Services: 105.38 (-3.50%)
- Consumer Discretionary: 108.76 (-4.61%)
- Consumer Staples: 83.21 (-1.39%)
- Industrials: 181.94 (+1.73%)
- Energy: 59.38 (+0.30%)
- Materials: 50.29 (-1.04%)
- Aerospace & Defense: 238.23 (+3.08%)
- Biotechnology: 188.98 (+1.06%)
- Medical Devices: 49.44 (+0.06%)
- REITs: 28.38 (-0.11%)
- Semiconductor: 551.24 (-0.77%)
- Software: 87.10 (-2.16%)
Summary
In the view of the SGFX research desk, the current flareup in Middle East conflict stands as an unexpected risk for the market. However, the desk still sticks to its long-term view that the conflict and volatility in oil markets will subside.
The AI trade may continue to be questioned in markets by investors, and we could witness a further outflow of capital from tech companies if the companies investing heavily in AI are not able to deliver on their commitments.
The desk anticipates that AI investments will create positive cash flow, but what is and will remain unknown are who the market winners and losers will be.
Research references
- Magnificent 7 Lose $797 Billion as AI Skeptics Dump Tech Stocks - Bloomberg
- TIKR Terminal data
- Oilprice.com
Disclaimer: This article reflects the views and analysis of the author at the time of publication and is based on information believed to be reliable from publicly available sources. Spectra Global makes no representation or warranty, express or implied, as to the accuracy, completeness, or timeliness of the information contained herein, and accepts no liability for any loss arising from reliance on it. Spectra Global is licensed by the UAE Securities and Commodities Authority (SCA) under Category 5 (Promotion). Nothing in this article should be construed as a personal recommendation or as an inducement to enter into any transaction. Past performance is not indicative of future results. Spectra Global has no commercial relationship with any company referenced in this article.