U.S. stocks fell on Wednesday, led by a selloff in technology stocks after disappointing earnings reports from Alphabet Inc., the parent company of Google, and electric carmaker Tesla Inc. The weak start to the earnings season for major companies raised concerns about the recent surge in stock prices driven by the artificial intelligence boom.
The Nasdaq Composite Index posted its worst day in two years as major players stumbled after reporting second-quarter earnings. The technology-dominated index fell more than 3%, losing more than 650 points on Wednesday, its biggest drop in more than 400 trading days.
Alphabet shares fell 5% despite posting financial figures that beat expectations for both revenue and earnings. However, Tesla shares fell 13% after the announcement. Profits down 45% year-on-year.
This likely triggered a chain reaction across tech stocks. Nvidia and Meta Platforms lost 6.8% and 5.6% respectively, while Microsoft shares fell 3.6%.The high-flying and volatile group known as the “Magnificent Seven” saw their combined market value drop by $768 billion at the close.
The negative reaction to Wednesday’s results has heightened concerns about the ability of big-cap stocks to deliver strong performance, and even strong results from Apple, Amazon and other tech giants next week may not go down well with Wall Street.
The sell-off extended beyond the Nasdaq, leaving investors with nowhere to hide. The broad-based S&P 500 index fell 2.3%.The Dow Jones Industrial Average fell 1.2%, or 504 points. The sharp decline has raised concerns that investors may have been overly optimistic about the potential returns of artificial intelligence and the impact of the new technology on the market.