Apple leads US$383 billion tech rout in reversal from group’s 2023 rally

The largest technology stocks that lifted the broader market last year are having a less-rosy start to 2024.

The so-called Magnificent Seven, which includes Apple, Amazon.com, Alphabet, Microsoft, Meta Platforms, Tesla and Nvidia, slipped for the last four trading days, the longest losing streak in a month, according to the Bloomberg Magnificent 7 Price Return Index.

Shares of Apple, down 4.6 per cent in the time period, lead the slump that has erased US$383 billion in market value. The Nasdaq 100 Index has also fallen in the last four trading days.

“We don’t know if last year’s rally has fully ended, but it is completely normal to expect markets will pull back after a rally like we saw,” said Steve Sosnick, chief strategist at Interactive Brokers Group. “Without the year-end factors that turbocharged the rally, I think we’re seeing the party winding down.”

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It is a signal that investor doubts over the sticking power of the 2023 rally were well-placed.

Though the Magnificent Seven surged more than 100 per cent last year, driven by a frenzy in artificial intelligence, gains cooled in the second half of 2023 as investors mulled the Federal Reserve’s ability to execute a soft landing for the US economy, which would likely mean fewer interest rate cuts than expected.

“You’re not going to get high-single-digit or double-digit earnings growth if we get something worse than a soft landing,” Sosnick said. “But we’re not going to get six cuts with a soft landing.”

A few members of the group have also seen specific stock pressure early this year. Apple shares have been weighed down after gaining a new bear; Barclays analysts early this week downgraded shares of the tech giant to underweight, saying they expect soft demand for iPhones going forward.

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Tesla has shed 8.8 per cent in the last four days, its longest streak of losses in more than four weeks. Though Tesla reported on Tuesday that it delivered more electric vehicles in the fourth quarter than analysts expected, the company lost its place as the top seller of electric cars to China’s BYD.

To be sure, it is likely too early to say the tech-focused rally is over. Most of 2023’s gains recouped losses from a year earlier, and some of the group – Amazon, Alphabet, Meta and Tesla – are still below their all-time highs, signalling they could have room to run.

But, the largest tech names also have their work cut out for them in 2024. The companies need to continue to deliver not only solid technology, but profitable technology going forward, according to Sosnick.

“In December everyone bought the sizzle,” he said. “Now we have to see if the steak is any good.”