The tech industry was dealt a heavy blow as more than $280 billion was wiped off the combined market cap of the top seven blue-chip tech firms, known as the “magnificent seven.” These tech giants, including Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia, and Tesla, collectively account for a quarter of the S&P 500 index’s value. On October 25, following the release of several earnings reports, the tech stocks experienced a significant decline, raising concerns of an impending tech recession.
Among the “magnificent seven,” Alphabet, the parent company of Google, was the hardest hit, with its share price plummeting over 9%. This resulted in a staggering $180 billion loss in market cap, marking Google’s worst-performing day since the onset of the COVID-19 pandemic in March 2020. Y Charts reported that Amazon, Nvidia, and Meta also suffered significant drops, with their share prices falling by 5.5%, 4.3%, and 4.2% respectively. Apple and Tesla experienced relatively milder declines, with their share prices dropping by 1.35% and 1.9%. In contrast, Microsoft was the exception, boasting a 3.1% increase in its share price after reporting better-than-expected growth in its Azure business.
The widespread tech selloff that occurred during this period caused the S&P 500 to reach a five-month low. Analysts and experts have suggested that this market turbulence could be an indication of tech stock investors pricing in a potential recession. The hesitancy among buyers and the accumulation of headwinds are contributing factors to this growing concern. According to Andrew Lokenauth, a reporter for TheFinanceNewsletter.com, the fear of a “stock market crash” has also manifested in increased Google searches, with the search term experiencing a 233% spike in the past week.
While the tech stocks faced a steep decline, the cryptocurrency market demonstrated resilience during this period. Optimism surrounding the potential approval of spot Bitcoin ETFs in the United States contributed to a 16.3% increase in the market cap, which reached $1.3 trillion over the past week, as reported by CoinGecko. Notably, Bitcoin (BTC), Ether (ETH), Binance Coin (BNB), and XRP experienced significant price gains of 23.3%, 16.7%, 8%, and 15.2% respectively within the same seven-day period.
However, the cryptocurrency market has not proven impervious to challenging macroeconomic conditions. When the United States experienced a decrease in real gross domestic product during the first two quarters of 2022, the cryptocurrency market cap suffered a substantial 61.7% decline from $2.37 trillion to $907 billion, according to CoinGecko’s data.
As analysts debate the possibility of Bitcoin decoupling further from tech stocks and the S&P 500, previous research from the Multidisciplinary Digital Publishing Institute indicates that Bitcoin tends to trade similarly to a “tech stock” in the long run due to its extreme volatility. However, the same research firm deduced from an October 2022 report that Bitcoin can serve as a viable hedge against the U.S. dollar, displaying a negative correlation.
Recent data suggests that Bitcoin has already decoupled from the NASDAQ 100, experiencing a 34% increase while the NASDAQ index has fallen by 8.6% since September 1. This divergence in performance has led some observers to interpret the movement as a “flight to safety,” particularly when juxtaposed with the recent decline in several banking stocks.
The tech stocks in the “magnificent seven” have experienced a substantial decline, raising concerns over an impending tech recession. While Alphabet suffered the most significant losses, other tech giants also faced significant drops in their share prices. The tech selloff has prompted fears among investors, leading to an increase in the search term “stock market crash.” However, the cryptocurrency market has shown resilience during this period, with a notable increase in market cap. The long-term volatility of Bitcoin and the possibility of it decoupling further from tech stocks and the S&P 500 have garnered attention from analysts. Regardless, Bitcoin has demonstrated potential as a hedge against the U.S. dollar. As market conditions continue to evolve, it remains to be seen how the tech industry and the cryptocurrency market will fare in the face of ongoing macroeconomic challenges.