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Our reporter Ni Hao

On the "Black Monday" of the global stock market, the market value of the seven major US technology companies once evaporated by more than $1.43 trillion. After that, their stock prices rebounded, but the total market value loss for the whole day was still nearly $800 billion. Analysts believe that the previous excessive gains of the seven giants and the uncertainty of future investment returns have caused market concerns and become an important reason for the sell-off of their stocks.

Apple, Nvidia led the decline

The Wall Street Journal reported on the 6th that on Monday, technology stocks led the decline in U.S. stocks. The "Technology Big Seven" consisting of seven companies could have set a new record for the shrinkage of market value in a single day, but after recovering some of the lost ground before the close, this situation was avoided. On Monday, the seven major U.S. technology giants, including Apple, Amazon, Google's parent company Alphabet, Microsoft, Meta, Nvidia and Tesla, all fell sharply. Nvidia, the leader in artificial intelligence, led the decline, plunging 6.36% in one day, and its market value evaporated by more than $170 billion. Apple fell 4.82%, the worst single-day performance since September 2022. In addition, Alphabet fell 4.45%, Tesla fell 4.23%, Amazon fell 4.1%, Microsoft fell 3.27%, and Meta fell 2.54%.

The above seven American technology companies have a leading or even monopolistic position in the market. Their businesses are mainly concentrated in artificial intelligence, cloud computing, online retail, software services, electric vehicles and other fields. They have stable operations and outstanding sustained profitability. At the beginning of 2023, they were named the "Seven American Technology Giants" by an analyst at Bank of America. In 2023, the seven giants became the biggest winners in the market. The S&P 500 rose 24% last year, mostly driven by them. The S&P 500 includes the top 500 listed companies in the United States, accounting for about 80% of the total market value of the U.S. stock market. According to statistics from S&P Dow Jones Indices, as of the end of last year, the market value of the seven giants in the U.S. stock market was close to 12 trillion U.S. dollars, accounting for nearly 23% of the overall U.S. stock market.

Due to the previous large gains of the Big Seven, they have recently experienced frequent sharp declines amid market concerns.

Profit growth slows

Regarding the performance of the seven US technology giants on "Black Monday", Reuters quoted Coatesworth, an investment analyst at British company AJ Bell, as saying that over the past year, the market's expectations for the seven US technology giants have obviously become too high. Once they do not meet investors' expectations, their stock prices will fall.

The Big Seven have faced increasing pressure in recent weeks, mainly because of market concerns that they are investing too much in artificial intelligence data centers without getting a return in the short term. Among them, the financial reports of the three largest cloud computing service providers, Amazon, Microsoft and Google, are more worrying because their billions of dollars invested in artificial intelligence (AI) may drag down profits.

Last weekend, Berkshire Hathaway, owned by Warren Buffett, released its second quarter 2024 financial report, showing that the company reduced its holdings of Apple shares by $76 billion, a reduction of nearly 50%. Reuters said that Buffett's selling of Apple shares has triggered market concerns about other technology companies. Another technology giant, Intel, saw its stock price fall by as much as 30% last week. The company previously announced plans to lay off 15,000 employees.

According to Reuters, six of the seven technology giants have released financial reports, and the profit growth rate of these companies in the second quarter has dropped from 50% in the previous quarter to nearly 30%. Based on this, the market is sending a new signal that investors are no longer willing to pay for the promises of technology giants on artificial intelligence against the backdrop of slowing profit growth, and they want to see more practical results.

“AI is overhyped”

The Wall Street Journal said that Nvidia, the leader in artificial intelligence, was hit harder than most companies on Monday, not only because Nvidia's stock price has risen sharply in recent years, but also because the market believes that the company's Blackwell chip will be delayed for several months.

Mizuho analyst Jordan Klein said that if Nvidia delays the delivery of Blackwell chips, its sales revenue will be shifted to later quarters. "Although it is more like (revenue) is delayed, in the current market conditions, many investors will draw their own conclusions that demand is weakening and may sell stocks."

As artificial intelligence is hot in the capital market, some analysts have also warned about possible over-investment in artificial intelligence. According to CNBC, Elliott Management, one of the world's largest hedge funds, told clients that Nvidia is in a "bubble" and artificial intelligence is "over-hyped." Reuters said that despite the decline in stock prices and slowing profit growth of these giants, they are still making large-scale investments in the field of AI. Financial report data shows that the capital scale invested in AI by each giant is more than 10 billion US dollars each year. Bloomberg quoted an analyst as saying that investors are worried that the huge investment in artificial intelligence will not bring the same return on investment as in the past year.

Li Xunlei, chief economist of China Securities International, told the Global Times that the US AI giants had huge gains in the early stages and their valuations were too high, but when AI application scenarios have not yet been fully implemented, investors will naturally have doubts about returns and sell off in the market.

Li Xunlei believes that the AI ​​concept that has pushed up the stock prices of the seven giants has accumulated a lot of bubbles in the market. When the AI ​​business model becomes clearer and the application scenarios become richer, the hidden danger of their stock prices falling can be eliminated. ▲