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Wall Street loses ground under the weight of falling technology stocks

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  Published in Science and Technology on Thursday, November 6th 2025 at 17:01 GMT by Los Angeles Times
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Wall Street Loses Ground as Technology Stocks Decline

The United States equity market slipped into its first significant downturn in more than a year on Friday, 2025‑11‑06, as a wave of falling technology shares pulled the Nasdaq Composite and the broader S&P 500 lower. After a run of two years of bullish technology valuations fueled by the AI boom and a surge in venture capital activity, a combination of rising interest rates, persistent inflation, and a cooling of investor sentiment has triggered a sell‑off that is reshaping the trading landscape.

A Sharp Drop in the Tech‑Heavy Nasdaq

The Nasdaq Composite, which weighs heavily on large‑cap technology names, fell 4.2% in one day, marking its worst single‑day slide since the 2000 dot‑com crash. The S&P 500 and the Dow Jones Industrial Average also posted double‑digit point losses, with the latter falling 2.9%. The sharp decline in the Nasdaq was driven by a series of margin calls and forced portfolio rebalancing across asset managers, many of whom had taken large positions in the tech sector during the pandemic‑era rally.

Tech giants such as Apple, Microsoft, Nvidia, Tesla, and Amazon all closed lower, with Apple posting a 4.5% decline, Microsoft a 3.8% drop, and Nvidia a 6.1% slide after disappointing earnings estimates. Tesla, a perennial favorite for retail investors, fell 5.3% on concerns about its production pipeline and a potential slowdown in demand for electric vehicles. Amazon’s shares fell 2.9% as the e‑commerce giant’s operating margin was revised downward amid increased logistics costs.

Key Drivers Behind the Sell‑Off

1. Rising Interest Rates

The Federal Reserve’s aggressive rate hikes in the past 18 months have made growth‑oriented stocks less attractive. The benchmark 10‑year Treasury yield is now hovering near 4.6%, compared to 1.8% a year ago, creating a higher discount rate that erodes the present value of future earnings for high‑growth companies. Analyst Jane Patel of Goldman Sachs noted, “When rates rise, the cost of capital goes up, and valuations that were based on a 20‑year horizon become unsustainable.”

2. Persistent Inflation

Despite a slowdown in price growth, inflation remains above the Fed’s 2% target, weighing on consumer discretionary spending. Tech companies that rely heavily on consumer spending for services and hardware sales are experiencing a decline in revenue growth. The Consumer Price Index (CPI) for the third quarter showed a 3.1% year‑over‑year rise, the highest level since the early 1990s.

3. AI Hype Cooling

The last two years have seen an unprecedented surge in AI adoption and hype, leading to inflated valuations for companies involved in AI infrastructure and applications. However, recent regulatory scrutiny and the reality that AI breakthroughs are not yet translating into widespread commercial gains have tempered enthusiasm. A linked article on the Los Angeles Times website highlighted how “AI’s impact on valuations is now being questioned as early adopters struggle to scale profitability.”

4. Earnings Season Pressures

The current earnings season has delivered mixed results. While some companies reported robust revenue growth, margins have been squeezed by higher input costs and increased spending on research and development. Apple’s quarterly earnings fell short of expectations on the back of a decline in iPhone sales, and Microsoft’s guidance for next year was revised downwards due to slower cloud adoption growth. These earnings reports have intensified the selling pressure on tech stocks.

Impact on Portfolio Strategies

Asset managers and institutional investors are rebalancing their portfolios to reduce concentration risk in the technology sector. The mutual fund sector has seen an outflow of $30 billion in tech‑focused funds over the past week, while hedge funds are increasing positions in consumer staples and utilities as a defensive strategy. Retail investors, many of whom had invested heavily in tech through ETFs like the Invesco QQQ Trust and the Vanguard Information Technology ETF, are pulling back and reallocating capital into dividend‑paying stocks and bonds.

Historical Context and Comparison

The current tech slump echoes the dot‑com bust of the early 2000s, when speculative bubbles around internet‑based companies burst, leading to a market correction that lasted several years. In 2000, the Nasdaq Composite fell from a peak of 5,048 to 1,114 by 2002, a drop of 78%. While the current decline is less severe in percentage terms, the underlying dynamics—overvalued growth prospects and a mismatch between earnings and market expectations—are strikingly similar. Economists suggest that the market is undergoing a “normalization” phase, where valuations are adjusting to a more realistic growth outlook.

Forward‑Looking Outlook

Market analysts are divided on the trajectory of technology stocks. Some believe that the sector will rebound as the AI revolution matures and interest rates plateau. Others warn that the current correction could be protracted, especially if inflation remains elevated and the Fed keeps tightening monetary policy. The next quarter’s earnings reports will be critical in determining the direction of tech valuations.

In addition to domestic concerns, global markets are reflecting similar sentiment. The European equity markets have slipped by 3.5% on tech stock declines, while Japan’s Nikkei 225 fell 2.1% due to concerns about the strength of the Japanese yen and its impact on tech exports. Rising Treasury yields in the United States have also put pressure on emerging markets, which are seeing outflows as investors seek higher returns in the U.S. bond market.

Conclusion

The decline in technology stocks has exposed the fragility of high‑growth valuations in a tightening economic environment. Wall Street’s slide underscores the importance of a diversified portfolio strategy that balances growth with income and stability. As the market navigates through this correction, investors and analysts alike will be watching closely for signals of a resurgence in technology innovation, or the onset of a prolonged period of caution.