The Magnificent Seven stocks were poised to lose nearly to lose nearly $1 trillion in combined market value as recession fears and Berkshire Hathaway’s decision to cut its stake in Apple punctured a months-long rally in the sector.
The iPhone maker joined mega-cap tech peers NvIdia, Alphabet, Tesla, Microsoft, Meta and Amazon in plunging as 6.5%, wiping out roughly $900 billion in total market cap.
The share slide followed a weak payrolls report on Friday that pushed investors across the globe to safe assets and spurred bets that the Federal Reserve will have to soon cut interest rates to aid growth.
The Fed on Wednesday kept interest rate cuts unchanged, hinting the highly-anticipated move may come in September.
However, noted economist Jeremy Siegel called on the central bankers to immediately make emergency cuts as the market tanked.
Chip stocks, which had spurred fresh AI excitement from tech investors, were also hit hard by economic doubts on Monday. Intel, Super Micro Computer and Broadcom fell nearly 7%.
Intel had already suffered one of its worst trading days in 40 years on Friday when its stock price nosedived more than 25% after the company presented disappointing earnings and a cost-cutting plan that would lay off 15% of its workforce.
Shares of Amazon, Microsoft and Alphabet — the three biggest providers of cloud-computing services — fell in recent weeks as their earnings reports sowed doubts that their margins could take a hit from the billions of dollars being spent on AI.
“Expectations have arguably become too high for the so-called Magnificent Seven group of companies. Their success has made them untouchable in the eyes of investors and when they fall short of greatness, out come the knives,” said Dan Coatsworth, investment analyst at AJ Bell.
Over the weekend, Warren Buffett’s Berkshire Hathaway announced it had halved its Apple stake, fanning investor concerns.
The firm now holds a roughly $84 billion stake, down from about $140 billion at the end of March, according to Bloomberg.
Since Buffett first shared the company’s stake in Apple in 2016, its shares have skyrocketed 900% – raking in billions of dollars of unrealized profits for the firm.
And while many have panicked that Buffett’s pullback on Apple shares is a reason to sound the alarm, others on Wall Street have urged investors to keep calm.
“Buffett’s reduction of his Apple stake is merely about risk management,” Joe Gilbert, senior portfolio manager at Integrity Asset Management, told Bloomberg.
“If there were any concerns about the longer-term viability of Apple, Buffett would have exited the entire position. Similar to Berkshire’s other stock position reductions, Buffett has meaningful unrealized gains,” Gilbert said.
The day before Berkshire revealed the shares sale, Apple released its quarterly earnings, which signaled a return to revenue growth and predicted new AI tech would boost sales.
Apple remains Berkshire’s largest holding, so the firm may have just been trimming down on its shares.
“If you’ve got this outsized position you take some profits and you reduce some of your concentration risk,” Cathy Seifert, a research analyst at CFRA, told Bloomberg.
“They still have a fairly concentrated portfolio,” she added.
Berkshire previously cut its stake in Apple during the first quarter of the year, signaling a plan to snip away at the holding.
Some analysts believe investors should hold onto Apple, and even keep their hopes high that the company’s upcoming AI launches could boost sales.
“While some could read this as confidence worry, Apple just delivered a robust quarter with a massive AI driven super cycle ahead and we do not view this as the time to hit the exit button,” Wedbush analyst Dan Ives told Bloomberg.
Buffett’s company has also been cutting its stake in Bank of America – trimmed by 8.8% since mid-July.
So the company’s Apple stake cut is perhaps not a concern about Apple’s business in particular, but a prediction for the economy as a whole.
