In a significant blow to the technology sector, Wednesday marked one of the worst trading days of the year. The familiar chorus of fear surrounding higher interest rates once again took its toll on technology shares.
The market was dealt a double blow. Fitch downgraded the U.S. government’s debt rating late Tuesday, and ADP released a robust report on private-sector employment, both indicating the possibility of higher interest rates. As we saw in 2022, higher rates typically spell trouble for growth stocks in general, with technology businesses being hit particularly hard.
On Wednesday, the Nasdaq Composite faced a decline of approximately 2%, underperforming in comparison to the 1.2% drop of the S&P 500 and the 0.9% slump of the Dow Jones Industrial Average. There were very few tech shares that escaped the sell-off.
Even the titans of the tech industry, known as the “Magnificent 7” companies, experienced major slumps. Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon.com (AMZN), Nvidia (NVDA), Meta Platforms (META), and Tesla (TSLA) all felt the impact. Apple, which is set to report earnings on Thursday, held its ground relatively well with a modest 1.2% dip. However, the remaining companies saw declines of 2% or more, with Nvidia plummeting 4.5%.
Generative AI plays took a hit as investors opted to take profits. C3.AI faced a substantial decline of 10%, while Palantir (PLTR) saw a drop of 5.5%.
Cloud and security software stocks also experienced widespread selling. With a 6% decrease, Datadog (DDOG) was one of the casualties, alongside Elastic (ESTC) which fell by 7%. Zscaler (ZS) and CrowdStrike (CRWD) both saw declines of 7% and 6%, respectively.
In contrast, some investors sought refuge in the underperforming tech stocks of the year. Juniper Networks (JNPR), eBay (EBAY), AT&T (T), IBM (IBM), and Corning (GLW), all of which struggled in 2022, managed to gain ground during the session.