On October 25, the tech world experienced a significant setback as more than $280 billion evaporated from the combined market capitalization of the "big seven" tech giants. This group, often referred to as the "Big Seven," consists of blue-chip technology companies, namely Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia, and Tesla, and they collectively contribute to a quarter of the S&P 500's total value.
The day's losses were especially harsh on Google's parent company, Alphabet, which saw a significant drop of over 9%, wiping out $180 billion of its market value. This decline marked one of the toughest days for Google since the onset of the COVID-19 pandemic in March 2020. Other members of the Big Seven, including Amazon, Nvidia, and Meta, also suffered, with their shares decreasing by 5.5%, 4.3%, and 4.2%, respectively.
Although Apple and Tesla experienced relatively milder declines of 1.35% and 1.9%, respectively, Microsoft managed to stand out from the group by rising 3.1%, thanks to its Azure business reporting better-than-expected growth.
This widespread selloff in technology stocks drove the S&P 500 to a five-month low. The Kobeissi Letter, a financial newsletter, pointed out that when a small number of stocks that underpin the entire market stumble, it can cause a domino effect, leading tech stock investors to potentially factor in the possibility of a looming recession. Investors have shown growing caution amid accumulating headwinds, as noted by Corbisi, the firm behind the newsletter.
The concern over a "stock market crash" is also evident in Google search trends, with searches for related terms surging by 233% last week. Notably, while tech stocks faced significant turbulence, the cryptocurrency market demonstrated resilience, with its overall market capitalization increasing by 16.3% in the past week, reaching $1.3 trillion. Optimism around the potential approval of a spot Bitcoin exchange-traded fund in the United States contributed to the upswing, with Bitcoin, Ethereum, BNB, and Ripple experiencing notable increases.
Nevertheless, the cryptocurrency market has not proven impervious to adverse macroeconomic conditions. A decline in real U.S. gross domestic product during the first two quarters of 2022 resulted in a 61.7% decrease in cryptocurrency market capitalization, dropping from $2.37 trillion to $907 billion.
Despite the cryptocurrency market showing signs of decoupling from tech stocks and the S&P 500, research from the Multidisciplinary Digital Publishing Institute suggests that Bitcoin will continue to be volatile over the long term, similar to tech stocks. However, the report indicates that Bitcoin can serve as a viable hedge against the U.S. dollar, given its inverse correlation with the dollar.
Recent trends also suggest that Bitcoin might be viewed as a "flight to safety," particularly in light of the recent decline in several bank stocks, further highlighting its role as a diversification asset.
