Tech stocks rout as Middle East tensions weigh on markets

Major US stock indices ended lower, with the Nasdaq benchmarks and the small-cap Russell 2000 posting the biggest declines. A sampling of the day's steepest drop-offs includes:

• SharkNinja (SN) fell 9.13% to $174.92
• Credo Technology (CRDO) dropped 8.65% to $206.63
• Cadence Design (CDNS) lost 7.60% to $313.04
• Whirlpool (WHR) declined 7.10% to $37.94
• CrowdStrike Holdings (CRWD) slid 6.90% to $215.07
• Dell Technologies (DELL) slipped 6.80% to $425.00
• Strategy (MSTR) sank 6.03% to $124.93
• Coinbase Global (COIN) dropped 6.00% to $176.84
• Ciena (CIEN) fell 5.87% to $360.33
• Synopsys (SNPS) declined 5.63% to $414.82
• Datadog (DDOG) lost 5.57% to $223.84
• Fortinet (FTNT) dropped 5.31% to $161.85
• Palo Alto Networks (PANW) slid 5.25% to $362.08
• Oracle (ORCL) shed 5.23% to $141.32
• Shopify (SHOP) fell 5.12% to $139.82
• Block (XYZ) declined 5.05% to $77.88

Technology shares accounted for most of the losers, with cybersecurity stocks under widespread pressure. CrowdStrike fell 6.90%, while Datadog, Fortinet and Palo Alto Networks each dropped more than 5%. Chip-design software companies also faced difficulty, as Cadence Design sank 7.60% and Synopsys lost 5.63%. Dell and Oracle finished down 6.80% and 5.23%, respectively.

Crypto-related shares also moved lower, with Strategy and Coinbase each declining roughly 6%. Selling was not limited to technology: SharkNinja led the group with a 9.13% decline, and Whirlpool fell 7.10%. Overall, the weakness was broad, with growth stocks bearing much of the pressure.

After the closing bell, Dell reversed its earlier 6.8% drop after delivering a strong earnings beat and an upbeat outlook, with AI servers as a major contributor, according to the released figures.

• Adjusted EPS was $7.04, beating the $4.91 estimate by roughly 43%.
• Revenue came in at $47.0 billion, above the $44.9 billion expectation.

The outlook also came in well above expectations:

• Full-year adjusted EPS forecast at $25.50, versus the $18.99 estimate.
• Full-year revenue projected at $192 billion, compared with $174 billion expected.
• Full-year AI server revenue guided at $74 billion, up from the previous forecast of about $60 billion.
• Q3 adjusted EPS guided at $6.50, versus the prior figure of $4.48.
• Q3 revenue forecast at $49 billion, above the $41.42 billion estimate.

The headline numbers were strong, with Dell raising its AI server revenue forecast by about 23% and projecting revenue and earnings well above consensus estimates. However, shares had been down 6.80% earlier, suggesting the results were not enough to support the stock. The numbers alone do not explain why investors were selling despite the solid report.

Dell shares are currently up 10.25% at $468.89.

A snapshot of the major indices showed the Nasdaq 100 leading the declines, down 1.29%, followed by the small-cap Russell 2000, which dropped 1.23%. The Nasdaq Composite also fell more than 1%, while the Dow Jones Industrial Average and S&P 500 posted more modest losses.

• Dow Industrial Average: finished at 52,772.27, down 419.06 points (-0.79%).
• S&P 500: ended at 7,631.48, down 54.67 points (-0.71%).
• Nasdaq Composite: closed at 26,099.77, down 271.11 points (-1.03%).
• Russell 2000: settled at 2,920.13, down 36.32 points (-1.23%).
• Nasdaq 100: closed at 29,077.22, down 379.75 points (-1.29%).

Higher oil prices, driven by increased military tensions in the Middle East, have raised the probability of a September hike to 68%. The 10-year Treasury yield rising to 4.80% is also a concern, particularly as the U.S. Treasury needs to fund the deficit at increasingly higher rates, exacerbating the fiscal shortfall.