Stock Fall Due Concerns Tech Growth

Losses in Europe and Asia are mainly because of AI-related companies like Nvidia, Tesla, and Google-owner Alphabet.

The pan-European Stoxx 600 index dropped by 0.7%. This decline was due to a nearly 4% drop in Dutch chipmaker ASML, a 7% drop in Germany’s Infineon Technologies, and a massive 13.7% fall in Switzerland’s semiconductor company STMicroelectronics.

The downturn started in the US, where the tech-focused Nasdaq fell 3.6% on Wednesday. This was its biggest one-day drop since 2022, wiping out about $1 trillion (£776 billion) from the value of the Nasdaq 100, which includes the most valuable companies on the index.

The main companies affected were those related to AI, such as Nvidia, Tesla, and Alphabet, which have seen their shares soar in recent months. Investors have been putting money into the tech sector to avoid missing out on the potential AI boom.

However, the recent drop has caused concern about whether the excitement over major tech stocks, known as the “magnificent seven,” has been exaggerated. Nvidia’s shares fell by 7%, Alphabet by 5%, Microsoft by 3.5%, and Apple by 3%. Other stocks in the “magnificent seven,” like Facebook owner Meta, also fell, dropping 5.6%.

Tesla experienced its worst decline since 2020, falling by 12%. This happened after Elon Musk, the company’s CEO, reported a 45% fall in profits and delayed plans to unveil self-driving robotaxis from August to October. This delay has caused skepticism among investors. Musk has been trying to generate interest in the robotaxis, AI, and “genuinely useful” humanoid robots as demand for Tesla’s electric cars has decreased.

The stock market losses spread to Asia, where tech-related companies also declined. Samsung fell by 2%, Sony by 5%, and tech investor SoftBank by 9.4%. Japan’s Nikkei index ended the session down by 3%.

Early trading on Wall Street was more stable on Thursday, with the Nasdaq, Dow Jones, and S&P 500 indices slightly up. This was due to GDP data showing that the US economy grew faster than expected in the three months leading up to the end of June.

In summary, stock markets in Europe and Asia fell as concerns about the future growth of major tech companies led to a global sell-off, especially affecting AI-related firms like Nvidia, Tesla, and Alphabet.

FAQ

1. Why did the stock markets in Europe and Asia fall?

• The stock markets in Europe and Asia fell due to concerns about the future growth of major tech companies, particularly those related to artificial intelligence (AI) such as Nvidia, Tesla, and Alphabet. These concerns led to a global sell-off of these stocks.

2. What caused Tesla’s significant decline?

• Tesla experienced its worst decline since 2020, dropping 12%. This was due to CEO Elon Musk reporting a 45% fall in profits and delaying the launch of self-driving robotaxis from August to October. This delay, along with Musk’s efforts to generate interest in AI and humanoid robots, caused skepticism among investors.

3. How did the tech-focused Nasdaq index perform, and what were the main factors?

• The Nasdaq index fell by 3.6% on Wednesday, marking its biggest single-day decline since 2022. This drop was primarily driven by significant declines in the shares of AI-related companies such as Nvidia, Tesla, and Alphabet. Investors’ concerns about the overvaluation of these major tech stocks contributed to the steep decline.

Sources The Guardian