Monday's Market Sell-Off Raises Concerns Over Big Tech Earnings
The sharp sell-off in tech stocks on Monday highlights the importance of Big Tech earnings to the current bull market. A new AI development from Chinese company DeepSeek sparked concerns about competition for Nvidia (NVDA) and other tech giants, leading to a pause in US AI trading.
* Nvidia's stock plunged over 16%, while Microsoft (MSFT), Alphabet (GOOG), and Tesla (TSLA) all declined by 2% or more. Broadcom (AVGO), another major player in AI, fell more than 16%.
Analysts have warned for over a year that a slowdown in Big Tech's rapid earnings growth could pose a risk to the market. The 10 largest stocks, including Big Tech companies, now account for nearly 40% of the S&P 500.
Until now, there hasn't been a clear reason for a collapse in Big Tech's earnings growth. However, DeepSeek's new AI model has raised concerns that previous high earnings expectations may not be met.
Despite expectations of a slowdown in earnings growth for 2025, Big Tech remains a key pillar of the bull market thesis. The "Magnificent Seven" stocks (MSFT, AAPL, GOOGL, AMZN, FB, NVDA, TSLA) are projected to grow earnings by 21.7% in the fourth quarter, compared to 9.7% growth for other tech stocks.
Analysts believe that Monday's sell-off serves as a reminder that while political factors such as trade tensions are important, tech earnings will ultimately drive market returns in 2025.