Nasdaq closes out its first four-quarter slump since dot-com crash
The once high flying tech sector has endured a heavy selloff this year amid concerns that the sector’s growth could be curtailed by rising interest rates. The tech-heavy Nasdaq Composite is down more than 14%.
Chris Hondros | Newsmakers | Getty Images
A lot has changed in technology since the dot-com boom and bust.
The internet went mobile. The data center went to the cloud. Cars are now driving themselves. Chatbots have gotten pretty smart.
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But one thing has remained. When the economy turns, investors rush for the exits. Despite a furious rally on Thursday, the tech-laden Nasdaq finished in the red for a fourth straight quarter, marking the longest such streak since the dot-bomb period of 2000 to 2001. The only other negative four-quarter stretch in the Nasdaq’s five-decade history was in 1983-84, when the video game market crashed.
This year marks the first time the Nasdaq has ever fallen all four quarters. It dropped 9.1% in the first three months of the year, followed by a second-quarter plunge of 22% and a third-quarter decline of 4.1%. It fell 1% in the fourth quarter because of an 8.7% drop in December.
For the full year, the Nasdaq slid 33%, its steepest decline since 2008 and the third-worst year on record. The drop 14 years ago came during the financial meltdown caused by the housing crisis.
“It’s really hard to be positive on tech right now,” Gene Munster, managing partner of Loup Ventures, told CNBC’s Brian Sullivan on Wednesday. “You feel like you’re missing something. You feel like you’re not getting the joke.”
Other than 2008, the only other year worse for the Nasdaq was 2000, when the dot-com bubble burst and the index sank 39%. Early dreams of the internet taking over the world were vaporized. Pets.com, infamous for the sock puppet, went public in February of that year and shut down nine months later. EToys, which held its IPO in 1999 and saw its market cap grow to almost $8 billion, sank in 2000, losing almost all its value before going bankrupt early the next year. Delivery company Kozmo.com never got its IPO off the ground, filing in March 2000 and withdrawing its offering in August.
Amazon had its worst year ever in 2000, dropping 80%. Cisco fell 29% and then another 53% the next year. Microsoft plummeted by more than 60% and Apple by over 70%.
The parallels to today are quite stark.
In 2022, the company formerly known as Facebook lost roughly two-thirds of its value as investors balked at a future in the metaverse. Tesla fell by a similar amount, as the carmaker long valued like a tech company crashed into reality. Amazon dropped by half.
The IPO market this year was non-existent, but many of the companies that went public last year at astronomical valuations lost 80% or more of their value.
Perhaps the closest analogy to 2000 was the crypto market this year. Digital currencies Bitcoin and ether plunged by more than 60%. Over $2 trillion in value was wiped out as speculators fled crypto. Numerous companies went bankrupt, most notably crypto exchange FTX, which collapsed after reaching a $32 billion valuation earlier in the year. Founder Sam Bankman-Fried now faces criminal fraud charges.
The only major crypto company traded on the Nasdaq is Coinbase, which went public last year. In 2022, its shares fell 86%, eliminating more than $45 billion in market cap. In total, Nasdaq companies have shed close to $9 trillion in value this year, according to FactSet.
At its peak in 2000, Nasdaq companies were worth about $6.6 trillion in total, and proceeded to lose about $5 trillion of that by the time the market bottomed in October 2002.
Don’t fight the fed
Despite the similarities, things are different today.
For the most part, the collapse of 2022 was less about businesses vanishing overnight and had more to do with investors and executives waking up to reality.
Companies are downsizing and getting revalued after a decade of growth fueled by cheap money. With the Fed raising rates to try and get inflation under control, investors have stopped putting a premium on rapid unprofitable growth and started demanding cash generation.
“If you’re looking solely at future cash flows without profitability, those are the companies that did really well in 2020, and those are not as defensible today,” Shannon Saccocia, chief investment officer of SVB Private, told CNBC’s “Closing Bell: Overtime” on Tuesday. “The tech is dead narrative is probably in place for the next couple of quarters,” Saccocia said, adding that some parts of the sector “will have light at the end of this tunnel.”
The tunnel she’s describing is the continuing rate increases by the Fed, which may only end if the economy enters a recession. Either scenario is troubling for much of technology, which tends to thrive when the economy is in growth mode.
In mid-December, the Fed raised its benchmark interest rate to the highest in 15 years, lifting it to a target range of 4.25% to 4.5%. The rate was anchored near zero through the pandemic as well as in the years that followed the financial crisis.
Tech investor Chamath Palihapitiya told CNBC in late October that more than a decade of zero interest rates “perverted the market” and “allowed manias and asset bubbles to build in every single part of the economy.”
Palihapitiya took as much advantage as anyone of the cheap money available, pioneering investments in special purpose acquisition companies (SPACs), blank-check entities that hunt for companies to take public through a reverse merger.
With no yield available in fixed income and with tech attracting stratospheric valuations, SPACs took off, raising more than $160 billion on U.S. exchanges in 2021, nearly double the prior year, according to data from SPAC Research. That number sank to $13.4 billion this year. CNBC’s Post-SPAC index, comprised of the largest companies that have debuted via SPACs in the last two years, lost two-thirds of its value in 2022.
SPACs slumped in 2022
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‘Bargain basement’ shopping
Predicting a bottom, as all investors know, is a fool’s errand. No two crises are alike, and the economy has changed dramatically since the 2008 housing collapse and even more since the 2000 dot-com crash.
But few market prognosticators are expecting much of a bounce back in 2023. Loup’s Munster said his fund is holding 50% cash, adding that, “if we thought we were at the bottom we’d be deploying today.”
Duncan Davidson, founding partner of venture firm Bullpen Capital, expects more pain ahead as well. He looks at the dot-com era, when it took two years and seven months to go from peak to trough. As of Friday, it’s been just over 13 months since the Nasdaq hit its record price.
For private equity investors, in 2023, “I think we’re going to see a lot of bargain basement snarfing up of companies,” said Davidson, who got started in tech investing in the 1980s. To get to the market bottom, “we may have two years to go,” he said.
The Applied Materials logo on Dec. 17, 2024.
Nurphoto | Nurphoto | Getty Images
Applied Materials shares sank more than 10% in extended trading Thursday as the semiconductor equipment company provided outlook for the current quarter that came in light.
Here’s how Applied Materials did in its third-quarter earnings results versus LSEG consensus estimates:
- EPS: $2.48, adjusted, versus $2.36 estimated.
- Revenue: $7.3 billion vs $7.22 billion estimated.
Applied Materials said it expects $2.11 per share in adjusted earnings in the current quarter, lower than LSEG estimates of $2.39 per share. The company said to expect $6.7 billion in revenue, versus $7.34 billion estimated.
CEO Gary Dickerson said that the current macroeconomic and policy environment is “creating increased uncertainty and lower visibility.” He said the company’s China business is particularly effected by the uncertainty.
The Trump administration’s tariffs could double the price of imported chips unless companies buying them commit to building in the U.S. Applied Materials makes tools for chip foundries to physically make chips, much of which currently happens in Asia.
Applied Materials said that it has a large backlog of pending export license applications with the U.S. government, but that it’s assuming none of them will be issued in the next quarter.
“We are expecting a decline in revenue in the fourth quarter driven by both digestion of capacity in China and non-linear demand from leading-edge customers given market concentration and fab timing,” the company’s finance chief said in a statement. He added that it expected lower China business to continue for several more quarters.
Applied Materials reported $1.78 billion in net income, or $2.22 per diluted share in the quarter, versus $1.71 billion or $2.05 in the year-ago period.
The company’s most important division, semiconductor systems, reported $5.43 billion in sales, topping estimates, and representing a 10% rise from last year.
Applied Materials was praised by President Donald Trump earlier this month after it was included in an Apple program to make more chips in the U.S.
Apple said it would partner with the chipmaker to produce more manufacturing equipment in Austin, Texas.
WATCH: Apple and Trump detail $100 billion U.S. spending expansion: Here’s what to know
Lip-Bu Tan, chief executive officer of Intel Corp., departs following a meeting at the White House in Washington, DC, US, on Monday, Aug. 11, 2025.
Alex Wroblewski | Bloomberg | Getty Images
Intel shares rose 7% on Thursday after Bloomberg reported that the Trump administration is in talks with the chipmaker to have the U.S. government take a stake in the struggling company.
Intel is the only U.S. company with the capability to manufacture the fastest chips on U.S. shores, although rivals including Taiwan Semiconductor Manufacturing Company and Samsung also have U.S. factories. President Donald Trump has called for more chips and high technology to be manufactured in the U.S.
The government’s stake would help fund factories that Intel is currently building in Ohio, according to the report.
Earlier this week, Intel CEO Lip-Bu Tan visited Trump in the White House, a meeting that took place after the president had called for Tan’s resignation based on allegations he has ties to China.
Intel said at the time that Tan is “deeply committed to advancing U.S. national and economic security interests.” An Intel representative declined to comment about reports that the government is considering taking a stake in the company.
“We look forward to continuing our work with the Trump Administration to advance these shared priorities, but we are not going to comment on rumors or speculation,” the spokesperson said.
Tan took over Intel earlier this year after the chipmaker failed to gain significant share in artificial intelligence chips, while it was spending heavily to build its foundry business, which manufactures chips for other companies.
Intel’s foundry business has yet to secure a major customer, which would be a critical step in moving towards expansion and giving other potential customers the confidence to turn to Intel for manufacturing.
In July, Tan said that Intel was canceling plans for manufacturing sites in Germany and Poland and would slow down development in Ohio, adding that spending at the chipmaker would be closely scrutinized.
Under Trump, the U.S. government has increasingly moved to put itself at the center of deals in major industries. Last week, it said it would take 15% of certain Nvidia and Advanced Micro Devices chip sales to China. The Pentagon bought a $400 million equity stake in rare-earth miner MP Materials. It also took a “golden share” in U.S. Steel as part of a deal to allow Nippon Steel to buy the U.S. industrial giant.
Intel shares are now up 19% this year after losing 60% of their value in 2024, the worst year on record for the chipmaker.
WATCH: Trump decision to allow chip sales to China is ‘reverse tariff’
Alexander Karp, chief executive officer and co-founder of Palantir Technologies Inc.
Scott Eelis | Bloomberg | Getty Images
Palantir‘s astronomical rise since its public debut on the New York Stock Exchange in a 2020 direct listing has been nothing short of a whirlwind.
Over nearly five years, the Denver-based company, whose cofounders include renowned venture capitalist Peter Thiel and current CEO Alex Karp, has surged more than 1,700%. At the same time, its valuation has broken new highs, dwarfing some of the world’s technology behemoths with far greater revenues.
The artificial intelligence-powered software company continued its ascent last week after posting its first quarter with more than $1 billion in revenue, reaching new highs and soaring past a $430 billion market valuation.
Shares haven’t been below $100 since April 2025. The stock last traded below $10 in May 2023, before beginning a steady climb higher.
Retail investors are a key part of the stock’s strength.
Last month, retail poured $1.2 billion into Palantir stock, according to data from Goldman Sachs.
Here’s a closer look at Palantir’s growth over the last five years and how the company compares to megacap peers.
Government money
Government contracts have been one of Palantir’s biggest growth areas since its inception.
Last quarter, the company’s U.S. government revenue grew 53% to $426 million. Government accounted for 55% of the company’s total revenue but commercial is showing promise. Those revenues in the U.S. grew 93% last quarter, Palantir said.
Still, one of the company’s oldest customers is the U.S. Army.
Earlier this month, the company inked a contract worth up to $10 billion for data and software to streamline efficiencies and meet growing military needs. In May, the Department of Defense boosted its agreement with Palantir for AI-powered battlefield capabilities by $795 million.
“We still believe America is the leader of the free world, that the West is superior,” Karp said on an earnings call earlier this month. “We have to fight for these values; we should give American corporations, and, most importantly, our government, an unfair advantage.”
Beyond the U.S.
The U.S. has been a key driver of Palantir’s growth, especially as the company scoops up more contracts with the U.S. military.
Palantir said the U.S. currently accounts for about three-quarters of total revenues. Commercial international revenues declined 3% last quarter and analysts have raised concerns about that segment’s growth trajectory.
Over the last five years, U.S. revenues have nearly quintupled from $156 million to about $733 million. Revenues outside the U.S. have doubled from about $133 million to $271 million.
Paying a premium
Palantir’s market capitalization has rapidly ascended over the last year as investors bet on its AI tools, while its stock has soared nearly 500%.
The meteoric rise placed Palantir among the top 10 U.S. tech firms and top 20 most valuable U.S. companies. But Palantir makes a fraction of the revenue of the companies in those lists.
Last quarter, Palantir reported more than $1 billion in quarterly revenue for the first time, and its forward price-to-earnings ratio has surged past 280 times.
By comparison, Apple and Microsoft posted revenue of $94 billion and $76 billion during the period, respectively, and carry a PE ratio of nearly 30 times.
Forward PE is a valuation metric that compares a company’s future earnings to its current share price. The higher the PE, the higher the growth expectations or the more overvalued the asset. A lower price-to-earnings ratio suggests slower growth or an undervalued asset.
Most of the Magnificent Seven stocks, except for Nvidia and Tesla, have a forward PE that hovers around the 20s and 30s. Nvidia trades at more than 40 times forward earnings, while Tesla’s sits at about 198 times.
At these levels, investors are paying a jacked-up premium to own shares of one of the hottest AI stocks on Wall Street as its valuation has skyrocketed to astronomical heights.
“This is a once-in-a-generation, truly anomalous quarter, and we’re very proud,” Karp said on an earnings call following Palantir’s second-quarter results. “We’re sorry that our haters are disappointed, but there are many more quarters to be disappointed.”
CNBC’s Gabriel Cortes contributed to this story.
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