Top performing technology stocks in the US plummeted on 9th June 2017 as concerns rose that share prices of companies like Apple, Amazon, and Facebook had risen too quickly. At the end of the day, shares of Apple were down 4%, erasing more than US 30 billion from the market capitalization of the world’s most valuable company. Shares of Google parent Alphabet were down 3%, as were shares of Facebook and Amazon. Microsoft slipped 2%.
In the semiconductor space Nvidia lost 6%, Intel was down 2% and AMD dropped 5%. Netflix lost 5%, Salesforce.com was off 4% and Tesla fell 3%. The tech-heavy Nasdaq index, which is dominated by the five stocks, was down almost 2%.
The fall in tech stocks has given rise to concerns over a broad market fall as tech stocks were the single largest driver of equity markets over the last decade. In the near term, further fall in tech stocks will lead to broad market correction but as long as tech companies show strong growth, price falls will be seen as opportunity to buy and broad markets too will recover.
While the S&P 500 was up just 9% year to date, Apple was up 34% Google was up 26%, Amazon 35%, Facebook 33%, and Microsoft 16% this year as of June 7. Almost 40% of the gain in the entire Standard & Poor’s 500 Index this year was attributable to the five tech stocks, even though they make up only 13% of the index’s market value.
Apple, Google, Amazon, Facebook and Microsoft continue to be the favourite stocks of investors as these companies continuously innovate their products and services to deliver superior earnings growth thereby discounting their stocks’ valuation parameters at a rapid pace. The result is that the stakeholders benefit immensely and valuations of these stocks eventually reach epic proportions as everyone wants to own a piece of the pie. Short term corrections such as that witnessed on the 9th of June 2017 is an indication of excess valuations getting trimmed to some extent. As long as these companies innovate and continue to lead in terms of technology their stocks would continue to witness buying amidst corrections.