Tech Stocks Plummet Amid Rising Interest Rates and New AI Export Rules

Tech stocks experienced significant declines on Monday due to rising interest rates and new AI chip export regulations, affecting major players like Nvidia, Palantir, and Apple.

Tech stocks took a significant hit on Monday, driven by a combination of rising interest rates and new export regulations on AI chips announced by the Biden administration. The sell-off was widespread, affecting major tech companies across various sectors.

Nvidia, a leader in the AI chip market, saw its shares drop by 3.7% following the announcement of new export control rules aimed at limiting the sale of AI chips to certain countries. The company criticized the rules, stating they could stifle innovation and undermine U.S. technological leadership. Other AI-related stocks, including Super Micro Computer, Micron, and Palantir, also experienced declines, with losses ranging from 4.3% to 10%.

The broader market was also affected, with the Nasdaq and S&P 500 both falling. The Nasdaq dropped by 0.7%, while the S&P 500 saw a slight decline of 0.07%. In contrast, the Dow Jones Industrial Average managed a gain of 0.78%. The 10-year Treasury yield reached a new high of 4.77%, and oil prices surged, with West Texas Intermediate reaching $79.2 per barrel.

The sell-off in tech stocks was exacerbated by a strong jobs report released on Friday, which raised doubts about further interest rate cuts by the Federal Reserve. Investors are now scaling back expectations for rate cuts, with some Wall Street firms suggesting no cuts at all this year. This shift in expectations contributed to the tech sector's downturn, as higher interest rates typically lead to reduced valuations for growth stocks.

Quantum computing stocks, which had seen gains from last year's positive Alphabet chip announcement, also faced significant losses. D-Wave and IonQ saw declines of 28% and 10%, respectively, following comments from Meta CEO Mark Zuckerberg and Nvidia CEO Jensen Huang suggesting that practical quantum computers are still decades away.

In addition to the tech sector, other notable movements included a 23% plunge in Moderna's stock after the company lowered its sales guidance for the year. On a positive note, Lululemon's shares rose by 2.5% after the company raised its fourth-quarter earnings and revenue outlook. Trump Media & Technology Group's stock surged by more than 21% ahead of Donald Trump's return to the White House.

This week, investors will be closely watching key economic indicators such as the consumer price index (CPI) and producer price index (PPI), as well as earnings reports from major companies like JPMorgan Chase, Goldman Sachs, Taiwan Semiconductor, and UnitedHealth.

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