In August, a convergence of factors has led to a significant drop in market value for four prominent tech giants – Apple, Microsoft, Tesla, and Meta. These losses, amounting to a staggering $625 billion, have been part of a broader decline in the US equities market, making August the worst-performing month for stocks in 2023 thus far.
Among these companies, Apple has borne the brunt of the market-cap declines, suffering a substantial $314 billion slump. Following closely, Tesla experienced a dip of $117 billion, while Microsoft and Meta faced drops of $114 billion and $80 billion respectively. This collective slump contrasts with the overall positive trend that Big Tech stocks have enjoyed this year, fueled in part by investor enthusiasm around artificial intelligence.
Despite a strong performance in the broader stock market, particularly for Big Tech companies, this downturn can be attributed to seasonal patterns that have historically characterized August.
For more than three decades, August has consistently emerged as the second weakest month for stocks, a trend that is accentuated during the year preceding a presidential election.
The impact of higher interest rates and surging bond yields has also played a pivotal role in dampening equity performance. These factors have eroded the attractiveness of stocks as an investment class, as the increased costs of borrowing impinge on corporate profitability. Simultaneously, the option to attain higher returns with lower risk through increased bond yields has enticed investors away from equities.
The escalation in debt yields over recent quarters has stemmed from the Federal Reserve’s efforts to counter inflation by raising interest rates. These measures have compounded the challenges faced by Big Tech stocks.
Several company-specific issues have further exacerbated the situation. Apple’s lacklustre earnings report underscored declining sales for iPhones and iPads, a trend intertwined with slower consumer spending in the United States. Likewise, investors grew increasingly concerned about Tesla’s series of price reductions throughout the year, which may have been affecting the company’s profit margins.
In contrast to the downward trajectory of the aforementioned tech giants, Nvidia, a semiconductor company renowned for its GPU chips, has managed to buck the trend. Its exceptional performance this year can be attributed to a robust second-quarter earnings report, indicating an impressive 101% increase in revenue compared to the previous year.
The month of August has seen a remarkable decline in market value for Apple, Microsoft, Tesla, and Meta, collectively amounting to a staggering $625 billion. This trend aligns with the historical pattern of August being a weak month for stocks, particularly exacerbated in the year preceding a presidential election.
Additionally, the influence of higher interest rates and escalating bond yields has further dampened the allure of equities. Company-specific challenges faced by Apple and Tesla have contributed to their respective declines.
Notably, Nvidia has defied this downtrend, achieving exceptional success owing to a robust earnings report. Overall, August has been a challenging period for Big Tech stocks, underscoring the complex interplay of various market forces.