Why Nvidia, Intel, Marvell, and Other AI Stocks Plunged Today
Written by Joe Tenebruso for The Motley Fool -> A steep run-up in AI stocks' valuations made them more exposed to a pullback. Many tech stocks fell on Friday, as the artificial intelligence (AI)-fueled rally ran out of steam. Here's how some of the top AI stocks fared today:
A steep run-up in AI stocks' valuations made them more exposed to a pullback.
Many tech stocks fell on Friday, as the artificial intelligence (AI)-fueled rally ran out of steam.
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The downturn appears to have been sparked by a strong jobs report that stoked fears of interest rate hikes.
Many investors were hoping that the conflict in the Middle East would be resolved, energy prices would fall, inflation would subside, and the Federal Reserve would be free to cut interest rates.
Those hopes were dashed on Friday after job growth in May was much stronger than expected, with U.S. nonfarm payrolls rising to a seasonally adjusted 172,000 versus a consensus analyst estimate of 80,000.
While positive for job seekers, the report makes it harder for the Federal Reserve to justify rate cuts. Reducing interest rates when unemployment is already low can stoke inflation and overheat the economy.
Growth stocks are particularly sensitive to interest rate movements, as a higher portion of their value is derived from their future profits. When interest rates rise, investors discount those projected earnings at a higher rate, thereby viewing them as less valuable today.
