Behind a big tech stock tumble

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**Kimberly Adams** (0:31)
What's behind the sell-off of some tech stocks and why it matters for the rest of the economy?
From Marketplace in Washington, I'm Kimberly Adams. A big tech sell-off continued in Asia today. The key stock index in South Korea, the Copsie, closed down almost 6%. It dropped 10% yesterday. Susan Schmidt is portfolio manager at Exchange Capital Resources and joins me with more. Susan, good morning.

**Susan Schmidt** (0:56)
Good morning.

**Kimberly Adams** (0:57)
So, for a while, it felt like every stock globally and domestically having anything to do with AI were just going up. So what's been prompting this sell-off?

**Susan Schmidt** (1:07)
Well, we're starting to see a change in investor emotion around these stocks. There's concern now that has been building that big companies, that MAG7 predominantly, are spending too much on the AI buildout without seeing some sort of return. We're seeing that today. We're seeing a sell-off in these chip stocks overnight, certainly in Asia, and that will probably start to influence the US market as well. We have four of our biggest companies reporting this week. Microsoft and Meta reporting after the close this afternoon. Apple and Amazon after the close tomorrow. Investors are going to pay attention to what they're saying about their capital expenditures that spend on those semi-chips. And they're going to be very concerned about what kind of return they're getting for them.

**Kimberly Adams** (1:56)
This chip sell-off seems to have been sharper in Asian markets than here in the US. Why is that?

**Susan Schmidt** (2:02)
Remember that the composition of Asian markets is very different than in the US. The US has a very broad market. We have a lot of institutional investors. We also have a lot of retail investors. So they're all positioning for every sell, buy, trade. We have a lot of those happening. That's not the case in Asian markets. Asian markets are dominated by fewer stocks, so there's more volatility by nature. And when you have an approach happening in the market, investors are all starting to tilt towards one sentiment. You see everyone selling at once. There's pressure for those markets, and so stock prices come down more rapidly.

**Kimberly Adams** (2:38)
For those who aren't invested in tech, why does all this matter?

**Susan Schmidt** (2:42)
What happens in tech right now ripples through the rest of the economy and certainly impacts investor sentiment.
It does make a difference to overall spend because it ultimately impacts consumer confidence. So you see this, people who are making money in the stock market feel good about their income, they feel good about their net wealth, they spend more in the economy. We have seen that in recent data on who's spending, who's helping to keep the economy growing. It does have an impact. It's interesting to see. Ultimately, though, remember that this right now is all on paper. We're seeing these stocks go down. It doesn't mean that there's mass selling. It means that we're seeing stock prices adjust. Every time there's a sale, someone's buying it on the other side. These companies are still extremely large in size. Chips are still a part of the everyday economy and manufacturing process. So they're not going away. It's just a lot of difference in opinion about how that AI spend is going to continue.

**Kimberly Adams** (3:42)
Susan Schmidt is portfolio manager to Exchange Capital Resources. Thank you, Susan.

**Susan Schmidt** (3:47)
Thank you.

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