Why Shares of Meta and Nvidia Traded Lower Yesterday?
The U.S. equity markets
experienced another round of sell-off yesterday as inflation data
for the month of August was higher than analyst projections.
Inflation for August stood at 8.3%,
compared to estimates
of 8%. According to the Bureau of
Labor of Statistics, higher shelter and food costs offset a decline
in gas prices last month.
The tech-heavy Nasdaq
fell 5%, while the S&P
500 and Dow
Jones Industrial Index declined by 4.3% and 4%, respectively.
Every single stock in the Nasdaq 100 index traded in the red
yesterday for the first time since 2020.
And when the U.S. sneezes, the
world catches a cold. Most world indices are also trading lower
225 Index is down 2.5%
Hong Kong’s Hang Seng Index is
Australia’s S&P/ASX 200
Index is down 2.5%
Nifty 50 Index is down 0.8%
Tech stocks such as
Meta Platforms (NASDAQ:
NVDA) were also down by
9.4% and 9.5%, respectively, yesterday. Let’s see what impacted
these tech stocks on September 13.
Meta stock price is down 60% in the last
Meta Platforms is among the
worst-performing stocks in the S&P 500 and is trading 60%
below all-time highs. The social media giant has been wrestling
with multiple factors, including privacy issues, the broader market
sell-off, lower ad spending by enterprises, and a challenging macro
Earlier this week,
The Wall Street
WSJ claimed Meta’s Instagram Reels is fast losing
ground to TikTok.
The report states that Instagram
users spend 17.6 million hours each day watching Reels which is
much lower than the 197.8 million hours clocked on TikTok. One of
the most followed publications by investors,
WSJ accessed an internal report which stated
engagement for Reels fell 13.6% in August compared to the previous
WSJ, Instagram is struggling to recruit users who
create content. While Instagram has 11 million creators on its
platform in the United States, around 2.3 million post on the
social media platform each month.
Reels was launched in August 2020
to compete with the rising popularity of TikTok. It now accounts
for 20% of the time users spend on Instagram. Further, Reels
generates over 50% of the content that users share with each other
on Instagram via private messages.
In addition to lower user
engagement, Meta has to wrestle with privacy changes made by
Apple (NASDAQ: AAPL) to its
iPhone operating system, limiting the former’s ability to deliver
personalized ads. In Q2, Meta reported its first-ever decline in
quarterly sales, thereby accelerating the sell-off among
Nvidia stock price is down 61% from all-time
Shares of Nvidia, one of the
largest semiconductor companies in the world, are trading 61% below
all-time highs. The sell-off accelerated in recent days after the
U.S. government restricted Nvidia from selling some of its most
popular AI chip designs to China. Nvidia expects the restriction to
lower its revenue by $400 million in the next quarter.
There are several other headwinds
impacting the company that includes a downcycle in chip sales.
Additionally, the trade war between the U.S. and China might gain
momentum once again, aggravating the downturn. The ongoing bear
market surrounding the crypto segment will reduce demand for chips
used to manage blockchain networks.
lockdowns in China will impact demand for gaming chips. Nvidia has
also suspended sales to Russia during the ongoing war. Lastly,
the second largest blockchain network globally, is migrating to a
proof-of-stake validating mechanism, eliminating the need for
advanced computing devices.
Despite these challenges,
analysts expect Nvidia stock to gain over 50% in the next 12
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