The U.S. stock market’s hot streak that started in late March signalled it had overheated, with the May 14 S&P 500 benchmark index closing at 7,501 as the subsequent sessions led to a total 1.97% correction by the evening of May 19.
The most recent regular session demonstrated that the brutal correction is far from over, given that the ‘Magnificent 7’ companies erased a total of $273 billion between the morning and closing bells.
Google (NASDAQ: GOOGL) led the losses both in relative and absolute terms with its 2.09% fall, translating to a nearly $100 billion valuation drop. Apple (NASDAQ: AAPL), on the other hand, was the only stock within the group to end the day in the green, having climbed 0.38% and added slightly more than $16 billion to the blue-chip’s market capitalization.
Simultaneously, Broadcom (NASDAQ: AVGO) – the world’s seventh-largest company and one not included in the ‘Magnificent 7’ – suffered an even larger relative drop than GOOGL as it wiped $45.61 billion with a 2.29% fall.
Why the ‘Magnificent 7’ just wiped $273 billion in a day
By press time on May 20, there appear to be four main drivers of the latest correction once the mechanical reaction to the preceding 18% month-and-a-half rally is excluded.
To begin with, the third weekend in May brought renewed talk of continued military operations against Iran despite the country – per President Donald Trump’s repeated claims – being ‘desperate’ to reach an agreement.
Notably, the Islamic Republic has, so far, been rejecting every U.S. proposal, and its most recent offers allegedly include even less generous terms for the Western power than the previous rounds.
Simultaneously, the 30-year Treasury yield topped 5% for the first time since the lead-up to the Great Recession, increasing concerns about the actual health of the American economy and potentially providing an alternative explanation to the recent deluge of layoffs.
Are fears of an ‘AI bubble’ driving the sell-off
Problems have also been piling up on the business side with growing public hostility toward artificial intelligence (AI) and related infrastructure projects, especially as recent reports indicate little productivity gains upon adoption of the technology and a poor track record in terms of actually completing data centers in accordance with the original timetables.
The rising pressure has already led to several sudden and dramatic sell-offs for big tech stocks and has been exacerbated by the high degree of compute demand concentration in the hands of OpenAI and Anthropic – two unprofitable companies that have been heavily subsidized by compute providers themselves in what many analysts and observers describe as ‘circular deals.’
How Nvidia can make or break the stock market’s next trend
Lastly, Nvidia’s (NASDAQ: NVDA) upcoming earnings – scheduled for after-hours on May 20 – are likely contributing to the latest correction.
Indeed, despite widespread optimism about the company, other 2026 quarterly filings show that even strong results can lead to immediate sharp stock market crashes.
The risk is even more pointed due to the fact that Nvidia stands as the world’s largest company with a valuation above $5.3 trillion – itself a notable figure since it represents a $400 billion drop from one week earlier – and that the semiconductor giant has been a pivotal player in the ongoing AI boom.
Under the circumstances, shareholder reaction to the earnings could make or break the stock market trend and determine the short-term – and possibly long-term trajectory for much of big tech.
Featured image via Shutterstock
