$1 Trillion Wiped Out on Tech Stocks as Voters Rebuke AI
The Facts
- Technology shares fell sharply Thursday following Democrats' sweeping victory in the U.S. midterm elections, sending the Nasdaq 100 down more than 6% in midmorning trading to a five-month low and the S&P 500 lower by about 3%. The Philadelphia Semiconductor Index tumbled roughly 10%, extending recent losses.
- The Magnificent Seven stocks were on pace to shed a one-day record of roughly $1.13 trillion Thursday, with Tesla declining the furthest at more than -10% amid expectations of greater scrutiny of Elon Musk's companies. Nvidia dropped over 8%, Meta over 4% and the others lost 1-3%.
- The sell-off followed quarterly reports Wednesday by chipmakers Qualcomm and Arm Holdings. Qualcomm sank more than 10% after dialing down its earnings forecast, while Arm fell after posting underwhelming revenue from its push into AI.
Sources Split
LEFT
CENTER
RIGHT
+3
+1
+2
ESTAB
CRIT
CENTER
PRO
ESTAB
The Spin
Industry-critical narrative
Shoveling trillions into AI buildouts while revenue limps along at a fraction of that size was bound to crash. Companies that must keep returning to capital markets just to stay alive are gamblers, not businesses, as opposed to old fashioned companies with real products, earnings and durable cash flow. AI fantasies cannot and should not run the economy when there's zero clue as to when they'll actually create returns.
Pro-industry narrative
This was inevitable for political reasons, but punishing cash-rich companies with little debt for spending today is mathematically erroneous, as these firms, with double-digit revenue growth, are actually trading at a bargain. This selloff is the result of understandable voter anxiety over the economy, but companies are listening and ready to build in conjunction with public sentiment, leading to more jobs and stronger stock portfolios down the road.
Cynical narrative
While the financial aspects are important, this was about much deeper sociological issues facing the American people. Long before the election, voters voiced concerns about the impact AI and data centers would have on their lives, as well as the surveillance data these centers are collecting, and neither the government nor Big Tech listened to them. Once given a vote, they put their leaders on blast, so hopefully, their voices will be heard this time.
