Fitch Ratings’ downgrade of the US government debt rating, coupled with surprisingly robust private sector jobs data, sent shockwaves through the market on August 2, sparking fears of imminent interest rate hikes by the Federal Reserve.
In response, the tech sector witnessed one of its worst one-day sell-offs this year, as investors grapple with the potential ramifications of tightening monetary policy on high-growth companies.
One of the stocks that took a particular battering on Wednesday was C3.ai (NYSE: AI), a prominent enterprise artificial intelligence (AI) software provider.
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C3.ai stock analysis
Shares of C3.ai stood at $39.87, after nosediving by 10.14% on August 2 after market close. The steep drop wiped nearly $250 million off the company’s market cap in a single trading session, pushing it down from $4.25 billion to $4.01 billion.
The stock fell to an intraday low of $38.36 per share, before staging a rebound toward $40 ahead of the closing bell.
Over the past month, C3.ai’s shares are up nearly 8%, while its year-to-date gains stand strong at nearly 250%, driven by the ongoing boom in the broader AI market.
Why are C3.ai and other tech stocks down?
C3.ai’s steep share price drop comes as investors moved to take profits amid fears of the US central bank potentially prolonging its rate-hiking campaign.
The worries over more rate increases emerged after Fitch Ratings, one of the biggest credit rating agencies in the US, downgraded the grade on the US sovereign debt from “AAA” to “AA+.”
The last time such a move happened was in 2011, and it also sent stock prices tumbling.
In addition, a new ADP report showed that the US private sector 324,000 added jobs in July, well above expectations, despite the Fed’s extensive efforts to slow down the economy and rein in inflation.
As a result, the new data pummeled tech and growth stocks on Wednesday, with all three stock market indexes being in the red. The Nasdaq Composite fell more than 2%, while the S&P 500 and the DJIA lost around 1.4% and 1%, respectively.
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