Tech stocks Meta and Nvidia have seen more than $750 billion in market capitalization evaporate from their recent highs. This massive correction is shaking the markets and raising concerns about the solidity of the tech sector, until now the driving force of the upward trend.
Meta collapses 19% after disappointing results
Meta stock plunged 19% after reporting earnings that fell 19% last quarter. A historic plunge which caused the group to lose $240 billion in valuation in one session, an absolute record. Meta had already suffered a similar debacle on February 3, 2022, erasing 232 billion.
During the conference on results, CEO Mark Zuckerberg highlighted advances in AI, citing the Meta Llama language models and the Meta AI conversational agent. But he especially insisted on the heavy losses of the Reality Labs division, dedicated to the metaverse. It shows losses of 3.85 billion this quarter and has accumulated 45 billion in the red since the end of 2020.
While Zuckerberg promises that these bets will ultimately generate massive revenues, he admits that they will require “multi-year investments” before being profitable. A horizon too distant for Wall Street which fears seeing the group burn its cash in these uncertain projects. Especially since Meta forecasts a sharply increasing investment envelope in 2024.
Nvidia suffers the shock wave of tech
Semiconductor manufacturer Nvidia was not spared from the storm on technology stocks. The sharp fall in its stock contributed to the purge of hundreds of billions in market capitalization from the sector.
This rout of the tech giants raises fears of a domino effect on the entire market, of which they are heavyweights. Their collapse calls into question the solidity of the stock market structure that they have been carrying at arm's length for months. Is the party over for tech?
The crash of Meta and Nvidia calls into question the future of technology stocks, the market locomotive for years. If these pillars of the rating were to collapse permanently, the entire upward dynamic would be halted.
The next sessions will be crucial to assess the resilience of the indices in the face of the heavy losses of the tech behemoths. A contagion of distrust to the rest of the market would mark the end of the speculative euphoria which was driving the trend.
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