On Thursday, Alphabet lost about half a trillion dollars of value in a single day.
As always, the headlines called it the “worst day” for Google since they went public more than 20 years ago.
Then another $200 billion got knocked from Amazon’s market cap…
And on Friday, the damage spread to semis…
With the chip index falling more than 7% and stocks like AMD down double digits
But if you think about it, this is counterintuitive…
Because if you’re punishing Amazon for spending too much on CAPEX…
(And Google, Microsoft and Meta)
You can’t also punish chipmakers… because where do you think that CAPEX is being spent?
Amazon’s bill is Nvidia’s paycheck... and every dollar a tech giant spends on AI chips is revenue for a chip company.
So if the spending continues, the hyperscalers will have less cash and the chip makers will do well…
And if the spending shrinks, the hyperscalers keep more cash and the chip makers suffer…
But both can’t happen at once.
Yet on Friday, the market sold both anyway.
(Intel is a separate case btw - because it’s plunge was largely down to the PC market weakness)
So the trap on a day like Friday is searching for the sensible reason behind a price move.
In the short term, fear sells anything that sounds related, and the logic turns up later. Over longer periods, prices tend to follow what businesses actually earn.
You’ve got until Tuesday evening to submit your review… and be in for a chance to win a virtual ticket to Investormania + 3 books of your choice
Oliver