The logic behind the sharp decline in US technology stocks across the board

When the Nasdaq index plummeted 2.29% in a single day, the 536 point drop hit its largest record in a month; When Nvidia's market value evaporated by nearly $200 billion in a single day, Tesla plummeted by 6.64%, wiping out half of last year's gains; When the semiconductor index retreated nearly 19% from its October peak, close to the historical adjustment range, the sharp fall of American technology stocks sweeping the whole sector was not an accidental short-term fluctuation, but the inevitable result of the multiple factors of liquidity ebb, profit differentiation, policy disturbance and valuation foam. Through the surface of market volatility, the underlying deep logic is reshaping the valuation system and competitive landscape of the global technology industry.

The reversal of liquidity expectations is the direct trigger for the sharp decline. The valuation of technology stocks, especially growth technology enterprises, is highly dependent on the discount model of future cash flow, and the monetary policy of the Federal Reserve has always been the core variable to adjust this model. The liquidity carnival triggered by zero interest rate and quantitative easing policy in 2020-2021 sent funds into the science and technology track crazily. The NASDAQ index quickly repaired the impact of the epidemic, and its valuation was close to the high level during the Internet foam. But since November 2025, hawkish officials at the Federal Reserve have collectively spoken out to break the illusion of interest rate cuts. Boston Fed President Collins has made it clear that "there is no hope of further interest rate cuts in the short term," causing market expectations for a December rate cut to plummet from 91% to 69%, and the 10-year Treasury yield to soar to 4.8%.

The differentiation and hidden concerns of profit fundamentals constitute the core support for the sharp decline. The frenzy of technology stocks in the early stage was largely based on optimistic growth expectations, but the profit shortfall exposed during the third quarter earnings season has dealt a heavy blow to market confidence. Meta's performance is highly representative. Although the company's third quarter revenue increased by 26% year-on-year and advertising revenue exceeded expectations by $50.82 billion, a one-time non cash income tax expense of $15.93 billion resulted in a 83% year-on-year drop in net profit, earnings per share far below market expectations, and a daily market value evaporation of approximately $226 billion.

The multiple disturbances of policies and regulations have intensified the market's risk aversion. At the domestic policy level in the United States, the "Big and Beautiful Act" introduced by the Trump administration has triggered tax adjustments, which not only directly impact the short-term profits of companies such as Meta, but also raise concerns in the market about the long-term impact of policy changes on the stability of technology companies' profits. At the international level, the US export restrictions on high-end chips have not only constrained the overseas revenue growth of companies such as Nvidia, but also raised concerns in the market about the disruption of the global technology supply chain.

The rational return of the valuation foam is the deep logic of this sharp decline. After experiencing irrational gains in the early stages, the valuations of some technology stocks have seriously deviated from fundamental support. Although the semiconductor index PE has fallen to 60-70 times, it is still in the 60% percentile of the past decade. Although the valuation of AI core assets has rebounded to the level before the Spring Festival in 2025, the PE of some leading enterprises still remains in the range of 30-50 times, far higher than the average level of traditional industries. Michael Bury, the "big short", revealed that he was short of AI leader, which was a direct challenge to this valuation foam.

From a longer-term perspective, the sharp decline in technology stocks this time is not a signal of industry recession, but a "healthy correction" in the global technology industry's transition period. In the aggressive interest rate hike cycle of the Federal Reserve in 2022, technology stocks have experienced a 35% pullback. Giants such as FAANG have shown resilience with strong cash flow and stable profits, while small technology companies lacking fundamental support have been eliminated by the market, forming a pattern of "strong always strong".

For investors, the logical implications revealed by this sharp decline are particularly important: in the context of declining liquidity, the valuation of technology stocks will place more emphasis on profit certainty and cash flow quality, and policy sensitivity and industry competition patterns will also become key considerations. Technology companies that can maintain a leading position in technological iteration, achieve profitable growth in cost control, and remain stable in policy fluctuations will eventually cross cycles and achieve value return. The adjustment of US technology stocks will also promote the transformation of the global technology industry from "scale expansion" to "quality improvement", laying the foundation for the long-term healthy development of the industry.

Ultimately, the sharp decline in US technology stocks across the board is the result of the resonance of multiple logics including liquidity, fundamentals, policies, and valuation systems. It is not only a rational correction of the early foam, but also a return to the development law of the science and technology industry. In this process of value reassessment, the true power of technological innovation will be highlighted, and the global technology industry will also move towards a more mature and stable development stage in a fluctuating adjustment.