The Nasdaq 100 index fell to an important support level as tech stocks were sold off.
1min read Technology stocks are experiencing a sell-off.
The NASDAQ 100 index, a tech stock index of about 100 of the largest non-financial companies in the NASDAQ Composite, has fallen more than 9% from its all-time high of 20,675 points earlier this month to 18,757 points. The main driver is not fundamental issues but investors moving from the long-term outperforming tech stocks to the cheaper parts of the market.
Part of the reason for the price decline is concern among shareholders about the ability of hundreds of billions of dollars in artificial intelligence-related investments by tech companies over the next few years to deliver returns. Analysts expect Meta(META.US), Microsoft(MSFT.US) and other companies to increase capital spending after Alphabet(GOOG.US,GOOGL.US) said on its earnings call that the risk of underinvestment was greater than the risk of overinvestment. However, analysts still expect companies in the NASDAQ 100 index to deliver higher returns on equity than companies in the S&P 500 index over the next few years.
These companies will undoubtedly continue to raise profits, maintain cash and maintain their competitive positions over the next few years. But investors are willing to pay less for these strong returns, which also raises concerns about returns.
Bobby Molavi, executive director of equities at Goldman, said the sell-off in tech stocks was partly due to “over-concentration in the market”. This means that at some point, investment portfolio managers will start buying these growth stocks again.
The NASDAQ 100 index is trending towards stability at a key level. According to FactSet data, it was trading around 18,750 points on Thursday afternoon, slightly above its 100-day moving average of 18,709 points. Typically, when there is a major change in the investment environment, such as in 2022 when interest rates surged, the index falls sharply off this level. However, since then, this level has been a “support” for most of the past 12 months. More importantly, the current situation is not as severe as in 2022, so if buyers continue to hold this level, it would not be surprising.
As of Thursday’s close, Nvidia(NVDA.US) fell more than 7%, Meta fell 0.54%, Alphabet rose slightly; Microsoft fell 0.9%, and the stock jumped more than 6% after-hours after the latest earnings.