What’s behind the massive selloff in tech stocks?

1. Shares of several prominent technology firms experienced a significant decline on Monday morning, coinciding with a broader market sell-off. 

Nvidia recorded the most substantial decrease among the Magnificent Seven tech stocks, opening 14.2 percent lower compared to the previous market close on Friday. Tesla's shares opened down by 10.9 percent, while Apple fell by 9.6 percent, and Amazon saw an 8.2 percent drop at the commencement of trading. 

Meta, the parent company of Facebook and Instagram, opened with a 7.6 percent decline, and Alphabet, Google's parent company, decreased by 6.8 percent. Microsoft exhibited the least fluctuation among the major tech stocks, with a 4.8 percent drop at the market's opening on Monday. 

By midday, shares in all seven companies had slightly rebounded, although they remained in the negative. 

The sharp decline in tech stocks on Monday morning occurred as the overall market faced a downturn, driven by escalating concerns regarding a potential recession. Investors reacted to Friday's disappointing jobs report, which indicated that the U.S. economy added only 114,000 jobs, with the unemployment rate rising to 4.3 percent.

The Dow Jones Industrial Average opened down by 1,100 points on Monday, reflecting a 2.8 percent decrease, while the Nasdaq composite fell by 6.2 percent, and the S&P 500 index dropped by 4.2 percent shortly after the market opened. 

Analysts from Wedbush Securities noted in a research report on Saturday that "the perfect storm panicked tech sell-off has now gained steam after the weaker jobs report yesterday fueled the R word fears and worries the Fed is now too late in its cutting cycle with tech stocks in the center of this Category 5 storm sell-off." 

Major technology stocks, which were already facing challenges following mixed second-quarter results over the past fortnight, are also affected by Warren Buffett's decision to reduce Berkshire Hathaway's stake in Apple by 50 percent. 

Nevertheless, the Wedbush analysts contended in a subsequent note on Monday morning that "now is not the time to panic on the tech trade." 

They reported receiving inquiries from global investors over the weekend questioning whether the tech bull market and the historic surge in tech stocks have come to an end.

1. In recent weeks, technology stocks have exerted downward pressure on the market. Following disappointing earnings reports from Alphabet and Tesla in late July, both the S&P 500 and the Nasdaq composite experienced declines, reaching multiweek lows. 

Despite the ongoing market downturn, John Higgins, chief markets economist at Capital Economics, expresses doubt that the AI-driven market rally has come to a close. 

Higgins noted in a Monday analysis, “This situation resembles 1998 more than 2000, when the dotcom bubble burst, as we are currently witnessing a temporary decline in share prices alongside a strengthening yen.” 

He further elaborated, “A significant distinction between now and 1998 is the lack of a substantial issue or risk to the US financial system. Our assessment suggests that the stock market is likely to rebound, as the economy performs better than anticipated and investors rekindle their interest in AI.”