The recent sell-off in technology stocks has significantly impacted several investment funds, erasing much of their 2024 gains in just a few weeks, according to data from FSA.
The decline in tech stocks has wiped approximately $3 trillion from market value in under a month. This downturn has been driven by investor concerns over a potential Federal Reserve policy misstep, following recent increases in U.S. unemployment figures.
Sentiment toward artificial intelligence (AI) and technology stocks has soured after disappointing quarterly earnings reports from major tech companies. The S&P 500 index has fallen over 5% in recent weeks, with significant drops in major tech constituents like Alphabet, Microsoft, and Nvidia.
Chip stocks have been particularly hard hit, with ASML, AMD, and Arm experiencing declines of 26%, 28%, and 39%, respectively.
Funds heavily invested in technology stocks, buoyed by initial enthusiasm for AI, have been particularly vulnerable. Semiconductor exchange-traded funds (ETFs) have seen more than two-thirds of their year-to-date gains erased by the recent sell-off. For instance, one ETF has dropped from an 18.56% gain for 2024 to a 5.14% year-to-date loss.
Actively managed funds have also been affected, with some losing nearly all their 2024 gains within a matter of weeks. Despite this, some funds continue to show high single-digit or double-digit returns, thanks to their diversified holdings.
Richard Clode, portfolio manager at Janus Henderson Global Technology Leaders, remains optimistic about certain tech stocks. He noted a similar market correction in the summer of 2023 after a strong first half of the year and emphasized that the current downturn may be a temporary adjustment.
Clode acknowledged ongoing debates about the sustainability of AI infrastructure investments without immediate returns. However, he believes this is a matter of timing, as capital expenditures for AI infrastructure will eventually lead to returns.
Fund performance data was sourced from FE fundinfo and pertains to products authorized by Hong Kong SFC or Singapore Mutual sectors.
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