The United States is leading a downturn in the stock market that has global repercussions because of renewed concerns about the nation’s economy and the effect of artificial intelligence on market values.
US stocks have been quite fond of Nvidia since 2019. However, the company experienced a significant drop of almost 10% in its shares due to disappointing earnings growth last week.
Several other tech stocks in the AI industry were also affected, as market analysts indicated that investors were cashing in on their profits following strong performances throughout the year.
The Nasdaq, which receives a lot of influence from technology companies, fell by more than 3%. Since the market turbulence in early August, when worries about a potential US recession first surfaced, that was its biggest decline.
Additional lacklustre data on the US economy, specifically for manufacturing, was mentioned as another factor contributing to the overall decline in the Wall Street market on Tuesday. Meanwhile, the cost of Brent crude oil decreased by nearly 5% to $73 per barrel.
The declines had a significant impact on Asian trading on Wednesday, as Japan’s Nikkei fell by almost 4%.
Trading platform IG observed the FTSE 100 in London opening 0.8% lower, reflecting the decline witnessed in London the day before due to the impact of weaker oil and broader commodity prices, which were influenced by the US factory data.
Michael Arone, the chief strategist at State Street Global Advisors, claims that the recent declines in the company’s earnings show that being good is no longer enough.
“There were some slight imperfections this quarter that led to people deciding to sell.” From a quantitative analyst’s perspective, it’s worth noting that the S&P has seen a 20% increase by the end of August. This recent development provides yet another opportunity to capitalise on the high valuations and slowing growth rates in the tech sector. There are doubts that the significant investment in AI will result in substantial increases in revenues and earnings.
“What has occurred here is quite predictable; as people come back from their summer vacations, trading activity is increasing, and the results have been positive as we enter a traditionally slow period.” In the past four years, stocks have consistently performed poorly in the month of September. This trend has also been observed in six out of the last 10 years.
“I anticipate a sustained shift in focus from technology stocks to a more comprehensive leadership.” That’s happening because interest rates and inflation are both decreasing, which should contribute to narrowing the gap in earnings growth between the technology sector and the rest of the market.