Monday marked a tumultuous day for the so-called “Magnificent Seven” stocks. Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), Meta Platforms (META), Nvidia (NVDA), and Tesla (TSLA) witnessed sharp declines in their share prices, which led to a collective market cap loss of over $650 billion.
The sell-off was triggered by fears of a potential recession coupled with concerns about overvaluation in the tech sector. Furthermore, some company-specific news pulled the stocks lower.
Let’s look at these reasons in more detail.
Economic Turmoil Drives Stocks Lower
Rising concerns about a potential recession, triggered by weak economic reports and geopolitical tensions, added to the overall market anxiety, resulting in downward pressure on stocks.
Further, the rise in bond yields made high-growth tech stocks look less attractive, as investors could earn higher returns with lower risk in the fixed-income market. This was another reason for the sell-off.
Valuation Concerns
The significant rise in prices of many tech stocks, particularly those in the AI sector, has recently led to worries about overvaluation.
Also, persistent inflationary concerns raised questions about the sustainability of these high valuations. Thus, investors must have rushed to lock in current gains.
Company-Specific Factors
Nvidia led the decline, with its stock down over 6%, on reports of a potential delay in the launch of its Blackwell AI chips due to design flaws. The news sent shockwaves through the tech sector, as Meta, Alphabet, and Microsoft – key Nvidia customers – are reliant on these advanced chips.
Additionally, Apple stock faced pressure as investors digested news of Warren Buffett‘s Berkshire Hathaway reducing its stake in the iPhone maker by nearly 50%.
On top of these, Alphabet stock added to negative investor sentiment after a federal judge found Google guilty of antitrust violations for its search engine deals.
The Takeaway
While the tech sector has been a driving force behind the market’s rally, Monday’s sell-off is a reminder of the tech industry’s volatility. As investors grapple with uncertainty about the future economic landscape, the Magnificent Seven’s performance is expected to be closely watched.
With this in mind, let’s check what Wall Street thinks about these stocks.
What are the Best Magnificent 7 Stocks?
TipRanks’ Stock Comparison tool shows that NVDA, GOOGL, MSFT, META, and AMZN have received a Strong Buy consensus rating. Moreover, these stocks have an Outperform Smart Score on TipRanks.
