On Wednesday, July 24, the “Big Seven” U.S. technology stocks experienced their most severe decline since the inception of ChatGPT, shedding over $768 billion in market value in a single day. This dramatic drop represents the most significant single-day loss for these tech giants since OpenAI‘s groundbreaking AI chatbot ChatGPT was launched in November 2022.
ChatGPT’s debut sparked a surge in artificial intelligence investments, significantly boosting corporate profits for major technology firms. However, recent financial setbacks at Tesla and Alphabet, Google’s parent company, have exacerbated the decline. The S&P’s information technology sector plunged more than 4% on Wednesday, marking its worst daily performance since September 2022.
Since reaching an all-time high on July 10, the “Big Seven” tech stocks have plummeted over 10%, entering a consolidation phase not seen since October of the previous year. The Roundhill Magnificent Seven ETF (MAGS-US) experienced a sharper decline, falling 6.1% on Wednesday and retreating more than 11% from its July 10 closing price.
In the past fortnight alone, the market capitalization of these major tech companies has dwindled by over $1.7 trillion. The staggering $768 billion loss recorded on Wednesday highlights the severity of the downturn.
July’s tech stock slump has been partly fueled by a weaker-than-expected inflation report, which has rekindled speculation about multiple rate cuts by the Federal Reserve through the end of 2024, with the first anticipated in September. As the Fed prepares to initiate a new cycle of rate cuts, small-cap and value stocks have begun to outperform, reversing their previous underperformance relative to the S&P 500 and Nasdaq Composite.
Tesla’s latest earnings report revealed a 40% year-over-year profit decline, leading to a more than 12% drop in its stock price on Wednesday—the company’s most significant drop since 2020. Alphabet has faced setbacks as its ambitious AI investments may take longer to yield results, contributing to a nearly 5% decrease in its stock price. Amazon (AMZN-US) also saw a nearly 3% decline, marking its worst day since September 2022.
Kim Caughey Forrest, Chief Investment Officer at Bokeh Capital Partners, noted that the delayed returns on AI investments are a critical factor in the current market turbulence.
Data from BondCliQ indicates that investors have been offloading bonds from the seven largest technology companies over the past two weeks. Despite this, bond yields—typically inversely related to prices—have remained relatively stable.
As technology stocks falter, the tech-heavy Nasdaq index plummeted 3.6% to 17,342.41, recording its worst day since October 2022. Meanwhile, the small-cap Russell 2000 and Dow Jones also experienced declines but with less severe losses. Both indexes have shown stronger performance compared to the broader market since early July.
Related topics: