The big tech companies have led the market for most of 2023, but that wasn't the case on Monday with most of the industry falling more than the market overall. In fact, the S&P 500 is up about 0.1%, meaning the non-mega-cap stocks are leading the way.
Shares of Alphabet (GOOG 0.60%) (GOOGL 0.53%) fell as much as 2.7% in early trading, Amazon (AMZN -0.21%) was down 2.6%, and Meta Platforms (META -0.90%) was off 3.8%. At 1:10 p.m. ET shares of the companies were down 1.9%, 2%, and 2.8% respectively. These aren't big moves for smaller stocks, but together the drop in market cap is over $60 billion.
Big tech falls out of favor
Alphabet is in hot water with investors who thought it was catching up to OpenAI and Microsoft in artificial intelligence (AI). Last week's demo of the Gemini model turned out to be optimistic, at best, as the company admits the prompts used were longer than indicated in a widely released video and the AI reacts much more slowly than the video.
Google, the unit releasing these AI products, has huge potential in artificial intelligence because it creates the underlying models, has a cloud unit, and even designs chips that end up in data centers and smartphones. It makes sense that this vertical integration could lead to better performance than rivals, but what investors have gotten so far are demos and very little that beats the competition. There was hope last week would change that, but it doesn't appear to be the case that this product will change the future of AI. In the long term, the company is well positioned, but public trust in the demos is a bit shaken.
Meta Platforms shares are falling as CEO Mark Zuckerberg has sold $228 million in stock since the start of November, the first sales since 2021. Zuckerberg has been slowly selling shares of Meta Platforms and still has a controlling stake in the company, but sales aren't looked at as a bullish sign by investors.
There isn't any significant news out about Amazon, but the move in big tech stocks can often be correlated, even if specific news isn't bad about any of them individually. Amazon should benefit from strong retail sales data this holiday and with Amazon Web Services becoming the profit driver of Amazon, the company has a lot of tailwinds in the cloud.
Perspective is in order
Today may not be great for big tech, but zoom out and the picture looks a little different. You can see below that all three have beaten the market by a wide margin over the past year, even after today's drop.
These are still some of the top-performing stocks on the market and their businesses are doing extremely well. Multiples may have been stretched and the market is pulling back to take gains for the year, but there isn't enough news to be a major sell-off today.
