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Major tech stocks fell on Wednesday, extending sharp declines logged in Tuesday’s session.
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Profit taking, jitters ahead of Powell’s Friday speech, and seasonal weakness are pressuring the sector.
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UBS said it’s still confident in the tech trade despite the latest bout of selling.
Tech stocks saw a second day of heavy selling on Wednesday, with major chip shares and AI-related names tumbling.
Chip firms led the declines, with Broadcom, Advanced Micro Devices, and Nvidia dropping, while AI stalwart Palantir was in the red for a fifth straight day.
Here are some of the major moves at around midday on Wednesday:
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Micron Technologies: -5%
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Palantir: -3%
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AMD: –2%
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Broadcom: -1.6%
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Nvidia: -1%
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Meta: -1%
The Nasdaq 100 dropped as much as 2% before paring losses, while the S&P 500 dipped 0.5%.
Jeremy Hartle, a wealth manager at Croak Asset Management, said it is likely that anticipation for Federal Reserve Chairman Jerome Powell’s Jackson Hole speech this Friday has been a catalyst for the latest drop.
The stakes are high heading into the Fed’s annual policy symposium, with investors anxious to hear what Powell is thinking about a rate cut in September and beyond.
Hartle said the speech will have big implications for the tech sector.
“Anytime you get a sector that has huge growth expectations and trading valuations, lower rates would justify some higher multiples,” he told Business Insider.
Some think that the market should be gearing up for disappointment on Friday. Michael Brown, senior research strategist at Pepperstone, said he expects Powell to reiterate his message that the economy is in a good place and that the Fed is comfortable waiting longer before making a move.
“I’d expect that this is a message Powell will reinforce in his keynote address at the Jackson Hole Symposium on Friday, likely disappointing numerous doves in the market, who have bumped up the odds on a September cut to as high as 85%.
Profit taking after a blistering summer rally, as well as weak seasonality have also been blamed for the two-day decline among chip and AI stocks. August and September are historically the weakest months of the year for the stock market.
In a note on Wednesday, UBS also pointed out that some alarm in the AI space may have been triggered by a note from MIT that said 95% of firms surveyed said they’ve seen no measurable return from AI investment to date.
Sam Altman’s talk of an AI bubble and Meta’s restructuring of its AI teams have also spurred some reassessment of the AI boom in recent days.
