U.S tech stock market loses $1 Trillion, posts worst day since 2022

The Nasdaq 100 Index had a $1 trillion sell-off on Wednesday as investors lost faith in AI due to uncertainty over how long the large investments in the technology would take to pay off.

The Nasdaq indices dropped by over 3% on the lowest day since October 2022. The list of laggards included a who’s who of AI technology darlings, led by semiconductor behemoths like Nvidia Corp., Broadcom Inc., and Arm Holdings Plc.

The selloff was sparked by Alphabet Inc.’s lackluster earnings report late on Tuesday, which featured an exaggerated capital expense. With a more than 5% decline, the company’s shares posted their worst performance since January.

Artificial intelligence (AI) firms had some of the biggest drops amid an impressive year. Super Micro Computer Inc. lost 9.15%. Nvidia saw a 6.8% decrease and Broadcom Inc. lost 7.6%. Mega-caps also experienced declines, including 2.9% for Apple., 3.6% for Microsoft Corp., and 5.6% for Meta

Tesla posted a more than 12% decrease for the day after Chief Executive Officer Elon Musk made brief remarks on his company’s autonomous vehicle effort.
The volatility of Nvidia’s options hit its highest level since the middle of March, and the put premium for Broadcom Inc. hit a three-month high.

It has been two weeks since a lower-than-expected inflation number caused the market to swing dramatically away from tech leaders and into small-cap stocks and other companies that would most benefit from a reduction in Federal Reserve interest rates.

The smaller caps beat the mega-caps for the fourth straight session and the eleventh time in eleven days. This week, the S&P 500 and Nasdaq 100 are down 1.5% and 2.6%, respectively, while the Russell 2000 is up 0.5%.

The rotation is still visible, but the actions were so forceful. In particular, investors are paying attention to growing talk in certain Wall Street circles about the impending collapse of the AI boom, which created a bubble that increased the value of the S&P 500 by $9 trillion in the last year. Even though it might not begin on Wednesday, the size of the decline is concerning.