The financial market is experiencing a decline.
Globally, stock markets are experiencing a slide, primarily due to a significant drop in the value of tech giant Nvidia. Approximately 280 billion in market value has vanished as a result.
Following the downturn in Wall Street and Japan, the Frankfurt stock market shows weakness, with the DAX decreasing by 0.7% to 18,602 points. It even dipped lower in the morning hours.
Tokyo's Nikkei index plummeted more than 4%, while New York's broad-based S&P 500 and tech-heavy Nasdaq dropped by 2.1% and 3.3%, respectively.
Tuesday saw Germany's leading index approaching the psychologically significant 19,000 mark, briefly hitting a record high before turning negative. Dissatisfying US economic data served as the main cause for this setback.
The US economy's industrial sector barely managed to curb its decline in August. The Institute for Supply Management's purchasing managers' index for the economic sector increased slightly by 0.4 points to 47.2 points, despite remaining below the growth threshold of 50 points.
The industrial sector accounts for around 10% of the US economy. It's currently facing challenges from the sluggish global economy and the US Federal Reserve's tight monetary policy, which has recently hinted at an imminent rate cut.
Nvidia's Stock Plummet
The US construction sector also experienced negative news. Construction spending decreased by 0.3% in July, according to the Commerce Department, and the sector is feeling the effects of the Fed's tight monetary policy, as mortgage rates have risen. A rate cut is expected in September, which should stimulate construction activity.
Weak sales data from the US Semiconductor Industry Association also affected sentiment. Tech stocks were particularly affected, with Nvidia leading the charge. Nvidia's shares fell by 9.5%, translating into a market value loss of 279 billion dollars. This sell-off continued after the New York trading session closed.
Due to the AI hype, Nvidia's stock price had skyrocketed since the beginning of 2023. The market value surpassed the three trillion dollar mark in early June, surpassing Apple at the time. Only Microsoft was more valuable. Consequently, a substantial decrease in Nvidia's stock price now equates to triple-digit billion dollar losses in market value. The last time such massive losses occurred within a day was in early February 2022, when Meta Platforms, the parent company of Facebook, lost 232 billion dollars in market value after a weak outlook.
In Japan, Tokyo Electron and Advantest, a chip tester manufacturer, saw their stocks decline by around 9% and 8%, respectively. Renesas Electronics experienced a drop of more than 10%.
"Market Completely Distorted"
Market experts viewed this as an indication that investors are growing more skeptical of technology related to artificial intelligence. AI has played a significant role in stock gains this year. Last week, Nvidia's quarterly projections failed to meet investor expectations.
Todd Sohn, a strategist at Strategas Securities, commented, "Over the past twelve months, so much money has flowed into technology and semiconductor stocks that trading has become completely distorted." asset manager BlackRock even questioned whether AI revenues justify the current tech investment boom in a note to clients.
Investors are now waiting for the upcoming US jobs data later this week to see if the US Federal Reserve will proceed with the anticipated rate hike with a half or quarter percentage point cut.
In response to Nvidia's disappointing quarterly projections, technology groups worldwide witnessed a wave of sell-offs, with Nvidia's shares plummeting by 9.5%. This led to a significant market value loss of 279 billion dollars for the tech giant.
Consequently, some market experts have expressed skepticism towards technology groups heavily invested in artificial intelligence, viewing this event as a sign of investors reevaluating their investments.
