Stock market downturn impacts large-cap technology stocks.

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When the U.S. markets commenced trading this Monday, the large-cap technology companies in the tech sector witnessed a drop of approximately $1 trillion in market capitalization. This decline further plunged the Nasdaq into correction territory following last week’s struggles.

The leading chipmaker, Nvidia, encountered a market cap loss exceeding $300 billion at the start, but managed to recover nearly half of it shortly after. By 10 a.m. ET, Nvidia’s shares had decreased by 7%. Similarly, Apple and Amazon saw their valuations plummet by $224 billion and $109 billion respectively at the market opening bell.

Adding to the significant downturn were notable declines in companies like Meta, Microsoft, Alphabet, and Tesla, causing the seven most valuable tech corporations to lose a staggering $995 billion in the initial trading moments. However, there was a partial recovery as trading progressed.

The overall market saw a broad decline on Monday with concerns about a potential recession triggered by disappointing economic data from the previous week, leading to a 12% drop in Japan’s Nikkei 225, marking its worst performance since the 1987 “Black Monday” crash on Wall Street. Bitcoin also tumbled by 11%, initiating a sell-off in cryptocurrency and related stocks.

Investor anxiety had been building within the tech sector for weeks, highlighted by the Nasdaq’s 3.4% decline the prior week, culminating in its poorest three-week showing in two years. Reports from Amazon, Alphabet, and Microsoft had provided reasons for apprehension on Wall Street, contributing to a decline among their peers.

This downturn starkly contrasts with sentiments from a few months back when investors celebrated the announcements from Meta CEO Mark Zuckerberg and Google CEO Sundar Pichai regarding significant investments in their artificial intelligence infrastructure.

Among these tech giants, Nvidia stood out, benefiting immensely from its GPUs powering the artificial intelligence revolution. While briefly claiming the title of the world’s most valuable company with a market cap surpassing $3 trillion, it has since dipped below $2.5 trillion.

Some market analysts have recently raised red flags concerning potential overinvestment in artificial intelligence. Reports from Goldman Sachs from June cautioned about the lack of substantial outcomes from major companies’ AI investments. Elliott Management, a prominent hedge fund, even labeled Nvidia as being in a “bubble,” indicating that the AI hype was exaggerated.

As Nvidia reports its earnings later this month, it remains noteworthy that the company has maintained revenue growth exceeding 200% over the past three consecutive quarters.