Nasdaq 100 Drops 10% as Tech Stocks Sell Off Amid Recession Fears

The US stock market has witnessed a significant sell-off in the technology sector, leading the Nasdaq 100 Index to enter correction territory. The index fell 10.2% from its peak last month, marking a notable decline in the performance of large-cap tech stocks that have driven the market higher over the past two years. This sharp drop is largely attributed to investors rapidly unwinding their positions in AI-related companies.

NVIDIA, a key player in the tech sector, has seen its market value shrink by over one-fifth since the Nasdaq 100 index hit a historic high on February 19th. This decline has contributed significantly to the overall index drop, with other major decliners including Tesla, Apple, Palantir Technologies, Meta Platforms, and Amazon. The sell-off reflects a broader shift in investor sentiment, as the exceptional performance of US tech 'FAANG' stocks in recent years has given way to concerns about future growth potential.

George Cipolloni, a portfolio manager, noted that while large tech companies reported good earnings last quarter, the outlook for future growth is uncertain. At current P/E ratios, the growth potential of these companies appears limited, leading to a more cautious approach from investors. This sentiment has been exacerbated by concerns over US trade policy and a darkening outlook for US economic growth, with investors increasingly acting as if a recession may be on the horizon.

The broader market has also felt the impact of the tech sell-off, with the S&P 500 falling 1.78% and the Dow Jones Industrial Average closing lower by 428 points. The Nasdaq 100, which tracks the performance of the 100 largest and most active non-financial companies listed on the Nasdaq Stock Market, finished the day in a correction, down 10% from recent highs. This marks the second time the index has entered correction territory this year, highlighting the volatility in the tech sector.

The sell-off in tech stocks has been particularly pronounced in high-flying mega-tech stocks, which had been driving the market's gains in recent months. The decline was driven by a combination of factors, including concerns over US trade policy and a darkening outlook for US economic growth. Investors are increasingly acting as if a recession may be on the horizon, leading to a multiday decline in the S&P 500 of 7