Tech giants’ market cap dips on rising bond yields, AI caution

Oct 3 – Global technology giants faced the biggest drop in their market capitalization in September, hit by a rise in US bond yields and waning enthusiasm over artificial intelligence (AI).

The market cap of Apple Inc (AAPL) shed about 9% to 2.67 trillion at the end of September, while Microsoft Corp (MSFT) and Alphabet Inc’s (GOOGL) market cap declined about 4% each to USD 2.3 trillion and USD 1.6 trillion, respectively.

US economic data released last month showed a tight labor market and a resilient economy, feeding concerns inflation levels would stay elevated and that the Federal Reserve would need to keep interest rates higher for an extended time to curb inflation.

Those worries pushed US 10-Treasury yields to hit a 16-year high last month, tarnishing the allure of riskier assets.

Tech stocks were particularly impacted, as the rise in Treasury yields, which are regarded as risk-free rates, diminished the value of the future cash flow of tech firms.

The market cap of Nvidia Corp, which benefitted from a boom in AI earlier this year, dropped nearly 12% to USD 1.07 trillion. Still, the company’s market cap has risen almost 200% this year.

Still, Goldman Sachs was optimistic about the outlook for mega-cap stocks, saying the consensus sales and earnings expectations for the largest US tech stocks have been upgraded since the start of August.

“The divergence between falling valuations and improving fundamentals represents an opportunity for investors: On a growth-adjusted basis, the mega caps trade at the largest discount to the median S&P 500 stock in over six years,” it said.

On the other hand, Exxon Mobil Corp (XOM) and UnitedHealth Group Inc (UNH) climbed about 6% each to USD 470.7 billion and USD 467 billion, respectively.

(Reporting By Patturaja Murugaboopathy and Gaurav Dogra in Bengaluru; Editing by Bernadette Baum)