Tech Recession Fears Mount as 'Magnificent Seven' Tech Stocks Lose $280B; Crypto Market Thrives
Summary:
After several earnings reports on October 25, over $280 billion was wiped from the seven leading tech stocks, raising concerns of a potential tech recession. Alphabet, the parent of Google, witnessed a 9% drop in its share price, the worst performance since the onset of the pandemic. Conversely, the cryptocurrency market has trended upwards with market capitalization increasing by 16.3% in the past week, fuelled by anticipation of US Bitcoin ETF approvals. However, the crypto market remains vulnerable to macroeconomic conditions. Amidst these market shifts, Bitcoin has shown resilience and some investors are interpreting this as a pivot towards Bitcoin as a safer investment option.
In the aftermath of numerous earnings reports issued on October 25, over $280 billion evaporated from the collective value of the leading seven tech firms, known as the "magnificent seven". This caused many to speculate about a potential tech recession. The "magnificent seven" represent the premier tech companies: Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia, and Tesla, which collectively account for one-quarter of the total S&P 500 index value. Alphabet, the organization behind Google, saw over 9% drop in share price, erasing $180 billion of its value. This dwindling in share price represents the worst performance since the onset of the global pandemic in March 2020. Share prices for Amazon, Nvidia, and Meta also dipped by 5.5%, 4.3% and 4.2%, while losses for Apple and Tesla were less drastic at 1.35% and 1.9%, respectively. Only Microsoft managed to resist this trend, registering a gain of 3.1% thanks to better than forecast growth in its Azure unit.
The current situation reflects the most extensive tech selloff in recent times, pushing the S&P 500 to lows unseen for five months. The inclination toward a market-wide selloff happens when the limited number of stocks that were keeping the market buoyant no longer do so. This might be an indication of market players factoring in a looming recession. Additionally, Google analytics indicate that the phrase "stock market crash" has surged 233% in Google searches in the past week.
Contrastingly, the cryptocurrency market has been on an upward trend due to anticipations of the United States passing Bitcoin ETF approvals; with market capitalization growing by a whopping 16.3% to reach a value of $1.3 trillion in the past week. There were sharp increases noted in various cryptocurrencies. Bitcoin (BTC), Ether (ETH), Binance Coin (BNB) and XRP advanced 23.3%, 16.7%, 8% and 15.2% respectively in recent weeks. Nonetheless, despite these increases, the crypto market is not completely immune to the effects of unfavorable macroeconomic conditions.
When the US registered a decline in gross domestic product during the first two quarters of 2022, the overall value of the cryptocurrency market shrunk by 61.7%, falling from $2.37 trillion to $907 billion. Speculations abound that Bitcoin might disassociate itself further from tech stocks and the S&P 500. An investigation by the Multidisciplinary Digital Publishing Institute hints that bitcoin generally behaves akin to a "tech stock"; this pattern can be attributed to Bitcoin's extreme price volatility. Even so, it can be utilized as a suitable hedge against the US dollar, as it displays a negative correlation with it. It's important to note that since September 1, Bitcoin has disassociated itself from the NASDAQ 100, soaring by 34% while the NASDAQ declined by 8.6% during the same duration. Observers suggest that recent investor shifts might be interpreted as a pivot towards Bitcoin as a more stable investment option, especially considering the recent plunge in various banking stocks.
Published At
10/26/2023 4:19:17 AM
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