The technology sector has experienced a one-month selloff, with major funds shifting investments away from AI stocks due to disappointing quarterly earnings and capacity constraints. The “Magnificent Seven” tech giants like Microsoft, Nvidia, Amazon, and Alphabet have seen declines, leading to sector rotations by investors. ASML, Europe’s largest tech firm, also saw a significant drop in shares, reflecting a global trend influenced by US export restrictions on chips to China.
Earnings reports from major tech companies indicate a slowdown in growth due to capacity constraints, increased spending on AI infrastructure, and economic challenges in China. The surge in demand for AI chips has put pressure on production capabilities, leading to increased spending on AI projects by tech giants. US restrictions on China could further impact AI companies, along with intensifying competition and slowing economic growth in the region.
Additionally, the selloff in tech stocks is also influenced by shifts in economic cycles, with investors taking profits and reallocating funds to sectors benefiting from lower interest rates, such as real estate and utilities. Warren Buffett’s recent sale of Apple shares highlights this trend, despite Apple remaining Berkshire Hathaway’s largest equity holding. As investors await upcoming inflation data, they will be looking for clues about future market trends amid ongoing sector rotations and macroeconomic shifts.
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