In a dramatic turn of events on Monday, global financial markets experienced severe turbulence, with tech’s megacap companies shedding nearly $1 trillion in market capitalization. This downturn deepened the correction that had already gripped the Nasdaq, triggering widespread investor anxiety.
At the market opening in the U.S., Nvidia saw its valuation drop by over $300 billion, though it managed to recover about half of this loss as the day progressed. The chipmaker’s shares eventually closed down 6.4%, translating to a $168 billion loss in market cap. Apple and Amazon also faced significant early losses of $224 billion and $109 billion, respectively. By the close, Apple was down 4.8%, or $162 billion in market cap, while Amazon dropped 4.1%, or $72 billion.
The impact extended beyond these three giants. Meta, Microsoft, Alphabet, and Tesla also suffered, contributing to a combined early loss of $995 billion among the top seven tech companies. Although partial recoveries were made, the damage underscored growing market instability.
Global markets reflected this turmoil. Japan’s Nikkei 225 fell by 12%, marking its worst day since the 1987 Black Monday crash on Wall Street. In South Korea, the Kospi index dropped 9%. The shockwaves were felt in the U.S. as well, where the Nasdaq plunged 6% within seconds of the opening bell. Cryptocurrencies weren’t spared, with Bitcoin plummeting 11%, leading to a broader sell-off in the digital asset market. The VIX, a key measure of stock market volatility, surged as investors flocked to the relative safety of Treasury bonds.
This market upheaval has been fueled by a combination of disappointing economic data and increasing fears of a recession. Last week’s feeble July jobs report in the U.S., coupled with underwhelming AI-driven quarterly earnings from major tech firms, heightened investor concerns. Adding to the anxiety, the Bank of Japan raised interest rates for the second time this year, a move that surprised many and further unsettled global markets.
The swift and severe market reactions have cast doubt on several key assumptions that had previously supported financial gains. The belief in an unstoppable U.S. economy, the rapid and revolutionary impact of artificial intelligence, and the stability of Japanese interest rates have all been challenged. As a result, a staggering $6.4 trillion has been erased from global stock markets over the past three weeks.
The sudden market collapse has prompted calls for the Federal Reserve to cut interest rates, potentially even before its next scheduled meeting in September. The bond market’s reaction has been telling, with a rush into shorter-dated Treasuries briefly causing yields on two-year notes to drop below those on 10-year bonds, a reversal typically seen as a sign of an imminent recession.
Memories of the 1987 Black Monday crash have resurfaced among market veterans, as the current sell-off shares similarities in terms of scale and speed. Despite partial recoveries, the dramatic shifts in sentiment and the rapid erosion of market value have left investors wary and uncertain about the future.
As traders and investors brace for potential further declines, the focus now shifts to how central banks and policymakers will respond to stabilize the markets and restore confidence.
