The Nasdaq looked set to confirm a bear market on Friday, down more than 20% from its record high, as China and the U.S. entered a tit-for-tat tariff war that raised recession fears and clouded the outlook for tech companies spearheading the AI revolution.
The tech-heavy index, home to six trillion-dollar market cap companies, hit a record closing high of 20,173.89 on December 16, but has struggled since the start of the year. Fears of a potential slowdown in AI spending had pushed it into correction territory earlier last month.
The index (.IXIC) was last down 3.6% on Friday, after China announced additional tariffs of 34% on U.S. goods in response to U.S. President Donald Trump's heavy levies on Wednesday.
If the U.S. tariffs went into place at current form, "overall tech earnings would come down 15% at least, the supply chain will be a Rubik's Cube rivaling Covid days, and the economy would go into a recession/stagflation," said Wedbush analyst Dan Ives.
The other indexes too have been hammered. The blue-chip Dow (.DJI) was on track to confirm a correction on Friday, a 10% drop from its record closing high, while the benchmark S&P 500 Index (.SPX) is down 15.3% from its all-time closing high.
An ETF tracking the Magnificent Seven stocks, the heavyweight tech adjacent names that have powered Wall Street's rise to record levels in recent years, has slumped 27.6% from its December record high.
The other big tech stocks have also tumbled.
Including Thursday's losses, Google-parent Alphabet (GOOGL.O) is down 4.5% and Microsoft (MSFT.O) 2.6%. Meta Platforms (META.O) has slumped 12.4% and Amazon (AMZN.O) has shed 10.6% in the same period.
"Companies like Apple, Microsoft, Alphabet, Amazon, and Nvidia — already navigating regulatory scrutiny and supply chain recalibrations — now face an additional layer of complexity because China is not only a vital consumer market but also a critical node in production," said Michael Ashley Schulman, chief investment officer at Running Point Capital.
"A 34% tariff will force firms (big tech and small tech) to rethink pricing, margins, and even geographic focus, as shifting final assembly or diversifying markets becomes more urgent," he said.
Tesla (TSLA.O) has plunged 13.1% since Wednesday's close as the electric-vehicle pioneer grapples with slowing sales and relentless protests against CEO Elon Musk's involvement in the Trump administration and right-wing politics in Europe.
Chipmaker Nvidia has shed 13.6%, as the biggest winner of the AI boom grapples with worries over slowing spending on data centers.
"The concept of taking the U.S. back to the 1980s 'manufacturing days' with these tariffs is a bad science experiment that in the process will cause an economic Armageddon in our view and crush the tech trade, AI Revolution theme, and overall industry in the process," Ives said.
Shares of PC makers and server makers have tumbled as electronics, the second biggest U.S. imports, primarily come from countries with some of the steepest tariff rates.
PC makers Dell Technologies (DELL.N) and HP (HPQ.N) are down 22.3% and 19.1%, respectively, this week. Server maker Hewlett Packard Enterprise (HPE.N) has lost 21.8% and Super Micro Computer about 14.4% week to date.
