Cautious financial backers are turning away from American tech shares
The US government has announced a significant move in the tech industry, planning to acquire a 10% stake in Intel by converting $11.1 billion of public funding under the CHIPS Act into equity. This historic state investment marks a new era for a major chipmaker, and the government is also reportedly considering stakes in other chip companies like Micron.
However, the market seems to be responding with a mix of anticipation and caution. The S&P 500 fell 0.2% to 6,395, while the Nasdaq tech index slipped 0.7% to 21,172. Tech giants like Intel, Nvidia, AMD, and Micron also experienced losses, with Intel falling nearly seven percent, Nvidia, AMD, and Micron losing between 0.1% and nearly four percent, and Apple and Meta falling by two and a half percent respectively.
The concerns surrounding this investment extend beyond the market's usual reaction to such news. There are fears that US President Donald Trump wants more influence over the industry, which could potentially lead to unpredictable outcomes.
Meanwhile, concerns are growing on Wall Street that tech giants like Intel, Nvidia, and Meta may be overvalued. These fears are heightened by the internal appointment of the CEO successor at Target, which led to a six percent drop in the retail giant's stock. The appointment, however, has sparked discussions about whether an external candidate would have been a better choice, with Steven Shemesh, analyst at RBC Capital Markets, stating that given Target's challenges, investors leaned towards an external candidate for the CEO position.
Looking ahead, market participants are firmly expecting a 25 basis point rate cut in September. However, the Federal Reserve's currency guardians found little support for a rate cut at the July meeting, according to the meeting's minutes. Anticipation is high for a speech by Fed Chair Jerome Powell at the symposium in Jackson Hole, Wyoming, for clues about the future path of interest rates. Traders fear that Powell may adopt a more hawkish tone, emphasize inflation risks due to tariffs, and resist the extent of easing expected by the market.
In other news, Estee Lauder, a cosmetics giant, expects surprisingly low adjusted earnings per share for the full year, which could potentially impact the company's stock performance.
This article provides a snapshot of the current market trends and the impact of government investments on major tech companies. As always, investors are advised to closely monitor these developments and make informed decisions based on their own research and analysis.
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