It is a truly dark day for tech stocks. Many of the largest and most prominent companies in the sector are seeing their shares plunge deep into the red as bearish energy continues to spread. Names that were soaring only a few months ago are falling fast and hard.
On days like this, it is easy to panic and wonder if markets will ever recover. But to the investors who have seen this before, these beaten-down tech stocks are a buy-the-dip opportunity.
Why are Tech Stocks Down?
The short answer to the question of the day is that recession fears are dominating markets. Experts can’t agree if the U.S. is diving headfirst into a recession or if it can still avoid it. But one thing is clear: the country has officially entered a bear market. With the S&P 500 down 21% from its recent peak, bearish energy has engulfed Wall Street street. This is particularly bad news for tech stocks.
The companies that dominated last year’s bull market are battling hard against broad market forces. Tesla (NASDAQ:TSLA) is having a particularly bad day, plunging more than 7% as of this writing. Meta Platforms (NASDAQ:META) is struggling almost as much, having fallen nearly 5%.
Both Netflix (NASDAQ:NFLX) and Amazon (NASDAQ:AMZN) are down about 4% and Apple (NASDAQ:AAPL) has dipped 3.5%. The best performance among big tech stocks has been Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) which has fallen 3.3%.
What It Means
It is clear tech investors are rushing to sell off assets before markets tumble even further. This isn’t the first selloff the sector has seen this year, but it is shaping up to be the most brutal. CNBC host Jim Cramer tweeted the following earlier today:
there is an astonishing level of tech selling right now. it is breathtaking to watch as sellers are sending the best techs down gigantically at 5 am
— Jim Cramer (@jimcramer) June 16, 2022
Is it simply recession fears that have compelled these investors to start offloading tech stocks? The answer is a bit more complicated.
What we are currently seeing is a collision of several macroeconomic headwinds hitting tech stocks at the same time. Inflation has been rising for months, leading the Federal Reserve to increase interest rates for the third time this year. “Rampant inflation, which is at the highest level in 40 years, has weighed on the major averages, as have fears around slowing economic growth and a possible recession,” reports CNBC.
All of this points to an unstable economy in which big tech stocks are at particular risk. The trend of fear-induced selling has quickly spread, pushing more stocks down in the process. But some investors, such as Cathie Wood, are loading up on tech stocks that have taken a beating. Wood recently increased her TSLA stock holdings after doubling down on Coinbase (NASDAQ:COIN) as crypto prices crashed.
What Comes Next for Tech Stocks?
As of now, it is hard to say for sure. The tech-heavy Nasdaq Composite is down 4% today and has fallen more than 7% for the week.
The market landscape looks grim right now. But with the Alphabet and Tesla stock splits scheduled for later in this summer, some investors are likely to seize the opportunity to buy on the dip before their holdings increase. No one knows if that will make enough of a difference to matter, but everyone should be watching.
On the date of publication, Samuel O’Brient did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
