Could the “tech bros” be losing their lustre?
The belief that tech giants such as Nvidia would continue to grow at a sizeable clip for years to come has seen investors around the world go long on US tech.
Even Australian super funds got in on the action, exposing Aussies to a three year bull run.
But a combination of US tech market performance, increased competition and uncertainty over what Donald Trump will do next, is sending signals that all is not tickety-boo with big tech.
Drop it like it’s hot
Nvidia saw its share price plummet 8.5 per cent on Thursday night despite sales of US$43 billion in the three months to April.
The results were impressive, just not impressive enough for investors who have very high expectations.
The market response? Sell.
Other tech giants like Apple (AAPL), Microsoft (MSFT), Alphabet (GOOG), Amazon (AMZN), and Meta Platforms (META) have recently experienced losses amid broader market concerns.
At the time of writing, the S&P 500, the benchmark for all risk assets, was down 4.6 per cent from its record high on Wednesday.
None of this would seem like cause for concern.
In fact, the market has climbed 61 per cent over the past three years - a great result by any measure.
But the fact that there has been a drop at all - not necessarily the size - is the story here.
That, and that so much of the world is exposed BIG to the US tech sector means any small movement has far reaching consequences.
AustralianSuper highlights a good example of Aussies’ exposure to US tech.
The fund reportedly held some $2 billion of Nvidia shares at the end of June.
That’s a lot of Australian mums and dads who probably don’t even know they are “shareholders”.
Big tech has lost its confidence
The launch of DeepSeek's R1 model in January, caught all US tech companies, bar none, off guard and sent shockwaves through global AI.
Founded in 2023, Chinese-based DeepSeek released its R1 large language model with capabilities rivaling OpenAI, but at a fraction of the cost and computing power.
The rise of DeepSeek has challenged the prevailing notion that developing cutting-edge AI models required vast resources.
It threatens the dominance of established US tech giants, forcing investors to reassess AI valuations.
Is the honeymoon over?
President Trump came to power on a wave of optimism with the market rising up to catch the sentiment.
A few months in and the wave is starting to peter out as investors are left pondering: what will happen next?
President Trump is known for his shoot-from-the-hip style with directives issued out of the blue often catching people off guard.
It’s not always a blueprint for a stable market.
Whether investors remain bullish or bearish on big tech remains to be seen.
Clearly there is still plenty of optimism, but if a small, recent shift in sentiment signals anything, it could be that broader market challenges lay ahead.
That would spell bad news for anyone exposed to it, including Australians through their super funds.