Tech Stock Plunge Raises Speculation of Market Correction

Stocks took a hit on Monday as Nvidia Corp. experienced a massive $430 billion drop in value, sparking concerns that the tech industry’s rally may be coming to an end. While sectors outside of technology saw gains, Nvidia’s three-day decline of 13% pushed the chipmaker into correction territory.

Deutsche Bank’s Binky Chadha suggested that US equities may be due for a pause after a tech-led rally. With optimism already priced into the markets, there are potential downside risks ahead, according to Lori Calvasina at RBC Capital Markets. John Stoltzfus at Oppenheimer also warned that some profit-taking should be expected.

The S&P 500 dipped below 5,450, with energy and financial shares rising while tech stocks retreated. The Nasdaq 100 lost over 1%, and Nvidia’s decline of 6.7% weighed on the chipmaker sector as a whole. Treasury 10-year yields fell, and Bitcoin dropped below $60,000 following a recent decline in the crypto market.

A survey showed that more than a quarter of respondents plan to reduce their stock holdings in the next month, indicating a shift in sentiment. The S&P 500 is expected to close the year at 5,606, only slightly higher than current levels, with nearly half of survey participants anticipating a correction later in the year.

Matt Maley at Miller Tabak warned that weakness in big-cap tech names could spill over into the broader market, creating challenges in the near-term. The upcoming results from Micron Technology Inc. could be a key indicator of market performance moving forward.

Marko Kolanovic at JPMorgan Chase & Co. expressed concern over the shrinking share of stocks driving US equity indexes, noting that rising markets on narrowing breadth could be a warning sign. However, Morgan Stanley strategists highlighted that a “narrow breadth” is not necessarily negative, as long as growth remains steady.

Despite the recent market turbulence, some analysts remain optimistic about the long-term potential of tech stocks, particularly those at the forefront of the AI revolution. While Nvidia’s valuation may be high, the promise of AI technology could drive future growth for the company and others in the sector.

In corporate news, Trump Media & Technology Group Corp. saw a surge in its stock price, while Oracle Corp. warned of potential financial impact from a TikTok ban. Apple Inc. faces potential fines in Europe over its App Store rules, and Airbus SE cut its earnings goals due to supply-chain issues.

Overall, the market remains volatile as investors navigate uncertainties surrounding tech stocks and broader economic trends. The coming weeks will be crucial in determining the direction of the market as earnings reports and economic data continue to shape investor sentiment.