What does the sharp decline in US technology stocks indicate

According to foreign media on September 13th, on the 12th local time, the three major US stock indices fell, with technology stocks leading the decline. Among them, the Dow fell 0.05%, the S&P index fell 0.57%, and the Nasdaq index fell 1.04%.

As of the close of the US stock market on that day, cloud service provider Oracle suffered a fierce sell-off in the market after releasing its financial report. Its stock price plummeted by 13.5%, marking its largest daily decline in over 20 years, dropping to $109.61, the lowest level since June this year, causing the company's market value to evaporate by over $46 billion; After launching the iPhone 15 series of products, Apple's stock price fell instead of rising due to the product upgrade being fully expected by the market and the lack of optimism about its competitive prospects with similar products. At one point, the price fell by more than 2% during the session; In addition, companies such as Netflix and Tesla have all experienced a decline of over 2%. Why did the US stock market suddenly plummet while the situation was still good?

The main reason for the decline was lower than expected performance. Taking Oracle as an example, the company released its financial report for the first quarter of the 2024 fiscal year on the 11th, showing a revenue of $12.5 billion in the first quarter, almost meeting Wall Street's expected $12.47 billion. However, the company has made conservative predictions for revenue growth in the second quarter, with an expected growth rate of between 5% and 7%, far below the average analyst expectation of 8.2%. The weak forecast released by Oracle shows that fierce competition in the cloud computing industry and reduced digital spending are dragging down its revenue growth. In fact, against the backdrop of overestimation, these technology companies will inevitably face severe punishment and backlash from the market if their performance falls short of expectations.

Intense market competition is an important factor in the decline. Just before Apple planned to hold the iPhone 15 product launch, senior hedge fund founder and portfolio manager Daniel Niels predicted that Apple might fall. Daniel said that given the significant breakthroughs made by Chinese technology company Huawei in technologies such as the 7nm processor node of its new Mate60 Pro series smartphones, Apple's stock price may not rise significantly before each new product launch, as it did before, and it will short Apple before and after the release of iPhone 15. Looking at it now, senior investors such as Daniel do have unique perspectives.

The aggressive policies of the United States are an important driving force. Since March last year, the Federal Reserve's continuous interest rate hikes have led to a significant outflow of funds from the stock market, resulting in a decrease in market liquidity and volatility, which is an important bearish situation for the stock market. In addition, the trade war between China and the United States, as well as the strict technology blockade and sanctions imposed by the United States on China, have led to a lack of confidence in the prospects of technology stocks in the market, and are also one of the reasons that cannot be ignored for the sharp decline in the stock market.

However, Oracle Chairman Ellison stated that he is still optimistic about the company's growing demand stimulated by artificial intelligence. AI companies have signed contracts with them to purchase Oracle's cloud services totaling over $4 billion, which is twice the amount of the company's previous fiscal quarter, with expanding cloud business being crucial.

Oracle is currently focusing on expanding its cloud infrastructure business to compete more effectively with cloud services from Amazon, Microsoft, and Google. At present, as the demand for artificial intelligence products surges, the expansion of cloud services will help Oracle expand its market share, as artificial intelligence products require strong computing power. CFRA analysts also emphasized that for Oracle, "the most important thing at present is cloud computing and business expansion

The CEO of Oracle also stated in a conference call after the financial report was released that the company's biggest challenge currently is to establish a data center as soon as possible to meet demand. After smelling the potential business opportunities of cloud services, even chip manufacturer Nvidia began to expand in the direction of cloud services. Microsoft recently announced that it will release the latest cooperation news with Oracle on the afternoon of September 14th, which has attracted widespread market attention and will further affect the competitive landscape in the cloud service field. It seems that various signs indicate that cloud services may be an important industry trend in the future.