Tech stocks crash, crypto doesn’t – What’s going on?

After a profit warning from Alphabet (Google’s parent company), tech shares fell hard this week. It was striking to see that tech fell while crypto (and Bitcoin) often did exactly the opposite. Normally those two move in tandem so what is going on?

It is remarkable that the so-called ‘magnificent seven’ in particular had a hard time in a week in which Bitcoin rose almost 20%. Is there a ‘decoupling’ of tech and crypto coming?

Charles Bronson

The ‘magnificent seven’ is a famous western which premiered in 1960. It starred Yul Brunner, Charles Bronson and Steve McQueen. The film became so popular (especially in America) that a remake was launched in 2016, but that one did less well.

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The name was adopted by the financial world (invented by analyst Michael Hartnett of Bank of America) because on Wall Street the ‘magnificent seven’ refers to the stock group that has accounted for the majority of the S&P500’s profits in recent years.

They are all tech stocks, namely Apple, Microsoft, Meta, Amazon, Alphabet, Nvidia and Tesla.

However, since a few weeks the growth engine seems to be sputtering. Nvidia was banned by President Biden from exporting AI chips to China. Over in Beijing, government employees were also banned from using Apple phones.

Then earlier this week, Alphabet issued a profit warning and even Meta’s results were less than expected. Tesla is having a hard time due to competition with cheaper models and fortunately Amazon is still holding its own.

But still, a tech correction might have begun.

Google searches for Stock market crash up 233% in past week.

If the stock market crashed 10%, what stocks are you investing in? pic.twitter.com/TQz8tVyL5U

— Andrew Lokenauth | TheFinanceNewsletter.com (@FluentInFinance) October 24, 2023

Decoupling

Ever since September 1st however, Bitcoin is up more than 30% while the Nasdaq is down about 8% during the same period. Normally tech and crypto move in tandem, but not so as of late.

According to analysts, a ‘decoupling’ is underway for Bitcoin and crypto because the halving is coming next year and a Bitcoin ETF may be launched.

Tech, on the other hand, is strongly influenced by macroeconomic factors such as war and trade between the United States and China. In any case, it is much more fun to invest in crypto in recent months than in tech stocks.