Nasdaq-100 Nears Bear Market, Loses $6 Trillion on Trump Tariff Fears

The Nasdaq-100 Index has experienced a significant decline, rapidly approaching bear market territory. The once-hot tech stocks are now being shunned by investors. A prolonged sell-off lasting six weeks has caused the Nasdaq-100 Index to lose nearly $6 trillion in market capitalization from its peak. This decline is driven by market concerns that President Trump's tariff policies could push the U.S. economy into a recession.

The companies most affected by this market value erosion are Apple and Nvidia, which had previously seen their market values surge past $3 trillion due to optimistic market expectations for artificial intelligence. If current trends continue, there may no longer be any companies with a market value exceeding $3 trillion globally. In this downturn, chip manufacturers Broadcom and Micron Technology have seen their stock prices fall by at least 33%, while hot AI concept stocks like Marvell Technology and Constellation Energy have plummeted by at least 45%. The "Big Seven" index has dropped by 24%, and Lululemon and Airbnb have each seen declines of at least 30%.

Despite the significant sell-off, as of Thursday, the Nasdaq-100 Index has still recorded an average annual increase of 20% over the past five years. This upward trend had previously raised market concerns about the formation of a bubble. Even after a 20% correction, the valuation of the index's constituent stocks remains high compared to historical levels, with a price-to-earnings ratio still above the average of the past two decades. For bullish investors, this is a worrying sign if the economy is on the brink of a recession.

Steve Sosnick, chief strategist at a prominent securities firm, commented, "This decline is indeed frightening, but we are only giving back a small portion of the long-term strong gains. There has not yet been a true capitulation sell-off, so further corrections are still possible. Large-cap tech stocks will eventually return to an attractive valuation range, but I am not sure if we have reached that point yet."

The Nasdaq-100 Index took 32 trading days to fall 20% from its peak. If it closes below this level, the speed of its entry into a bear market would be the third fastest since 2000. According to compiled institutional data, the Nasdaq-100 Index's price-to-earnings ratio has fallen from 38 times in February to 30 times, but it is still above the 25 times average of the past two decades.