Over $280 billion has been erased from the market value of the “magnificent seven” tech giants due to recent earnings reports released on October 25. This has sparked concerns about a possible downturn in the technology sector.
The “magnificent seven” includes Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia, and Tesla, collectively constituting a significant portion of the S&P 500 index’s value.
Alphabet, Google’s parent company, experienced a steep decline of over 9% in its share price, resulting in a loss of $180 billion in market capitalization. This marked Google’s worst day since the onset of the COVID-19 pandemic in March 2020.
Other tech giants like Amazon, Nvidia, and Meta saw their share prices drop by 5.5%, 4.3%, and 4.2%, respectively, according to data from Y Charts. Apple and Tesla experienced more modest declines, with their share prices falling by 1.35% and 1.9%, respectively. Microsoft, on the other hand, was the outlier, with its share price rising by 3.1% after reporting stronger-than-expected growth in its Azure business.
This recent tech sell-off has had a notable impact, causing the S&P 500 to reach a five-month low, according to Kobeissi, a financial expert. This situation has raised concerns that tech investors may be starting to anticipate a recession.
Search trends on Google also reflect fears of a “stock market crash,” with a 233% increase in searches for this term in the past week, as reported by Andrew Lokenauth of TheFinanceNewsletter.com.
In contrast, the cryptocurrency market has been on an upward trend, driven by optimism regarding potential approvals for spot Bitcoin ETFs in the United States. The market’s total capitalization increased by 16.3% to reach $1.3 trillion over the past week, as per data from CoinGecko. Notably, Bitcoin (BTC), Ether (ETH), Binance Coin (BNB), and XRP recorded significant gains of 23.3%, 16.7%, 8%, and 15.2%, respectively, over the last seven days.
Nevertheless, it’s important to note that the cryptocurrency market isn’t immune to challenging macroeconomic conditions. For instance, when the U.S. real GDP experienced a decline in the first two quarters of 2022, the cryptocurrency market capitalization dropped by 61.7%, falling from $2.37 trillion to $907 billion, according to CoinGecko.
While there is speculation about whether Bitcoin will become more independent from tech stocks and the S&P 500, previous research suggests that Bitcoin tends to behave like a “tech stock” in the long term, largely due to its extreme price volatility. However, it also serves as a potential hedge against the U.S. dollar, with negative correlation observed, as indicated in an October 2022 report from the Multidisciplinary Digital Publishing Institute.
In the period since September 1, Bitcoin has shown a decoupling from the NASDAQ 100, gaining 34% while the NASDAQ has fallen by 8.6%. Recent investment movements suggest that some may view this shift as a “flight to safety” towards Bitcoin, especially in light of the recent declines in banking stocks.
