The combined market capitalisation of the Magnificent Seven set of US technology megacaps has shed $2.3 trillion since its peak in July, as outlined by AJ Bell’s investment director Russ Mould today.
As Mould highlighted, this returns the Magnificent Seven, comprising Google parent Alphabet, Amazon, Apple, Nvidia, Microsoft, Facebook parent Meta and Tesla, to its May levels, standing only 5% above where it was in November 2021.
These seven companies continue to account for one-third of the S&P 500's total valuation and one-fifth of the global stock market value, making their performance extremely influential for global equities.
“There are two ways of looking at the summer stock market stumble,” said Mould.
“Bulls will see it as a hiatus and no more during the traditionally stale period where major players sell in May and go away, returning on St. Leger Day in September, while bears will argue this is the start of a long overdue reckoning for markets where buybacks, borrowing on margin (or in yen) and central bank largesse are providing liquidity to overvalued, overhyped risk-on assets.”
Mould predicted that some will see this as a “healthy (if apparently unexpected) correction, others as the start of something altogether nastier”.
Tech stocks have taken a beating following an underwhelming earnings season that failed to deliver supersized artificial intelligence-led earnings growth anticipated by investors.
This, combined with escalating recession fears in the US, has caused blood on the streets as investors turn fearful of a prolonged bear market.
For optimistic investors, this is nothing but a welcome buying opportunity, but the prospect of another bubble-bursting moment akin the the dot-com bubble at the turn of the millennium clearly has some investors rattled.
The led-focused Nasdaq 100 Index had one of its worst openings in recent memory today, nosediving nearly 1,000 points, or 5%, in the pre market.
The Dow Jones Industrial Average and broader S&P 500 have also been tossed lower.