Big Tech stocks have taken a hit, but no one’s stepping up to buy. The Nasdaq 100 has plunged 11% from its February peak, and the S&P 500 has dropped 10% from recent highs. The so-called Magnificent Seven—Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta, and Tesla—are now trading at 26 times forward earnings, the lowest since September. But even after the decline, valuations still haven’t touched the lows of 2018 and 2022, when tech giants faced profit pressure. Some analysts believe this slide is far from over. Violeta Todorova, a senior research analyst at Leverage Shares, said : “While I acknowledge that valuations look a lot better than they did in December, I don’t think this is the bottom. I have been tempted to buy this dip, but there’s still so much uncertainty out there, and I think things will get worse before they get better.” Despite a small rally on Friday, Apple suffered its worst weekly decline in more than two years, dragging the Nasdaq 100 down 2.5% for the week. Big Tech’s Valuation Are Well Off Bottoms of Past Slumps | Source: Bloomberg Tech stocks sink as Trump’s policies shake investor confidence Big Tech stocks were hitting record highs just a month ago. Investors had bet that Trump’s economic policies would fuel growth and provide regulatory relief. Those expectations have collapsed. Trump and his officials have signaled that stock market losses and economic pain are acceptable in pursuit of a long-term restructuring of the U.S. economy. With that shift, investors have pulled back from risky assets. Big Tech, which has been the biggest winner since the bull market began in October 2022, is now taking the hardest losses. The selloff has sent Meta, Amazon, and Tesla tumbling. Tesla, which has been in a freefall for months, is still trading at 82 times forward earnings—far above its peers. Not all tech stocks are equally expensive. Apple, the second-most expensive, now trades at 29 times forward earnings, while Alphabet is the cheapest at 18 times. Even at that level, Alphabet’s valuation is still higher than the lows it hit in 2022. The broader selloff has also forced analysts to revise earnings estimates. Wall Street now projects Big Tech profits will grow 22% in 2025, down from 24% in January. In comparison, Big Tech earnings surged 34% in 2024. The S&P 500 is expected to post 12% profit growth in 2025, slightly up from 10% last year. Market liquidity concerns deepen as Big Tech struggles The Nasdaq 100 has tried to recover six times in 17 trading sessions, but each attempt has failed. Art Hogan, chief strategist at B. Riley Wealth, explained why traders aren’t stepping in: “No one is willing to step in and catch the falling knife. There’s so much uncertainty. That’s why we haven’t had a durable bounce.” The 14-day relative strength index for the Magnificent Seven fell below 24, the lowest since 2019. Even after rebounding to 36, it remains well below 70, the threshold for an overbought market. Nasdaq Rout Erases Nearly $4 Trillion in Market Value | Source: Bloomberg Another major issue is market liquidity. Historically, market crashes—from Black Monday in 1987 to the 2020 COVID-19 meltdown—have been worsened by liquidity drying up. Right now, the warning signs are flashing. The Cboe Volatility Index (VIX) nearly hit 30 before pulling back, but stocks have continued to fall. Options traders are adding to the chaos. More than $2 trillion in S&P 500 options trade daily, and a growing chunk of that is in zero-day contracts—short-term options expiring on the same day. These contracts now account for 56% of S&P 500 option volume, a level that’s high enough to move entire indexes. Stefano Amato, a senior fund manager at M&G Investments, said : “This activity is now sizable enough to materially affect the movement of major equity indexes such as the S&P 500 or the Nasdaq.” Derivatives trading is fueling stock volatility The biggest impact of derivatives trading isn’t being felt in indexes—it’s hitting individual stocks. Tesla, Nvidia, and Apple, all major players in options trading, have been dropping faster than the broader market. This isn’t new. The GameStop short squeeze in 2021 showed how options trading can drive wild price swings. Another event adding to the pressure is triple witching, when stock options, index options, and futures contracts expire at the same time. Trillions of dollars in contracts expired last week. While that usually triggers brief volatility, this time, it added to the broader selling pressure. GME US Equity | Source: Bloomberg Market makers have managed to keep liquidity relatively stable for now. But if they start pulling back, stocks could drop even further. Benedicte Lowe and Georges Debbas, equity strategists at BNP Paribas, explained why that matters: “Liquidity is clearly key for underlying spot markets to absorb the flow generated from the option Greeks.” If market makers withdraw liquidity, stocks could overshoot downward before finding a real bottom. For now, investors are watching the Federal Reserve’s next move, the broader economic picture, and whether Big Tech’s AI-driven profit boom can hold up. Violeta Todorova summed up what’s driving investor hesitation: “This is really less about fundamentals and more about the macro and geopolitical picture.” Big Tech isn’t out of the woods yet. Cryptopolitan Academy: Want to grow your money in 2025? Learn how to do it with DeFi in our upcoming webclass. Save Your Spot
