The US stock market experienced a massive tech stock sell-off on Monday, January 13, 2025. This prompted many investors to dump the big players in the technology sector for more promising prospects. Consequently, this shift of allegiance drove investor sentiment that trailed dividends payout on profitable investments from 2024. Analysts have attributed this sudden change in financial allegiance to the rising interest rates and the resultant market volatility.
Big names like Rigetti Computing, the poster child of quantum computers, Palantir, Nvidia, and AppLovin saw stock value declines. Their shares dropped by 33%, 4%, 2%, and 1.5%, respectively. Analysts say Federal Reserve policies are complicit in driving the recent stock market decline. On Monday, 10-year Treasury Bonds posted the highest earnings reports since 2023.
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Interestingly, based on recent economic indicators, analysts are projecting that the Feds may not act on climbing interest rates in 2025. Greg Bassuk, CEO of AXS Investments, recently shared a similar opinion. He said, “While tech stocks made major gains as interest rates dropped last year, both Wall Street and Main Street have grave doubts about any further rate cuts by the Fed.”
Due to bond yields and rising inflation, growth stocks will likely experience more capital outflow. Most investors are in the financial market for the profits, so they naturally gravitate towards investment options with the most alluring earnings reports. In summary, growth stocks will continue to lose appeal to investors, probably until the Fed intervenes with policies to rein in inflation.
Financial analysts have also criticized a rumor that the US government is planning to clamp down on the semiconductor sector to staunch the export of AI chips. All the technology companies with active programs in AI chip development were affected by Monday’s stock market decline. Micron Technology’s stock also fell by 4% on that same day.
However, the market volatility of quantum computing stocks became significant after recent comments by Nvidia CEO Jensen Huang and Mark Zuckerberg drove investor sentiments. During separate interviews, the two big-tech CEOs inferred that the development of useful quantum computers is still decades from now.
Megacap tech stocks also contributed to this week’s stock market decline. Meta Platforms and Apple plunged by 1%, while Microsoft, Alphabet, and Amazon fell by less than 1%.
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As it stands, profitability and export sanctions are not the only concerns of investors. National economic indicators are prompting stock valuation concerns. So, it is safe for investors to be cautious and join the bandwagon of capital outflow and tech stock sell-off if needed. Analysts suggest the downward trend of stocks and the valuation concerns are not yet over. So we can keep our fingers crossed and see what the market becomes like in the coming week.