Is a “Chip-Wreck” on the Horizon?

Is another tech-based market crash impending? Are the “FANG” stocks in your best interest?

Tech-based stocks have been facing volatility lately as artificial intelligence (AI) and chip related issues arise. For example, NVDA (Nvidia) dropped over 7% yesterday and META (META Platforms) dropped nearly 3.4%. As for 2024 to date, four big FANG names have been on a downward trend – META, AMZN (Amazon.com), NFLX (Netflix), and GOOGL (Alphabet). Is your portfolio overconcentrated in FANG stocks? Are you “chip-wrecked”? Were these investment recommendations made in your best interest given your goals and needs? If you incurred substantial losses, you may have a case. You need to contact a Tech Stock law firm, like Malecki Law in New York, to review your situation.

Yesterday, on August 5, 2024, financial markets faced a crash worldwide, partially stemming from Japan’s Topix and Nikkei plummeting, 24% and 12% respectively. Yesterday was the worst day in the markets for Japan since the year 1987, this may be derived from the Bank of Japan increasing interest rates under 0.1% to 0.25% just last week, the greatest it has been in over fifteen years. The United States markets had a reactionary slide, including the S&P 500, which dropped 3% in just one day, this was the worst drop since September 2022. However, the S&P is still up nearly 9% for the year, to date. Global financial news should be followed carefully as Japan, China, South Korea, and Taiwan are some of the countries that manufacture most of the chips.

The long-term impacts are currently unclear, however, there may be warning signs. For example, Warren Buffet, a world renowned respected investor and stock picker, disclosed that his company, Berkshire Hathaway, sold almost half of its shares in AAPL (Apple) in the second quarter. This information was disclosed publicly over the past weekend, causing the stock to drop over 6% in one day. Have you incurred extensive losses due to this overconcentration in FANG stocks when you are approaching or in retirement? This investment strategy may not have been in your best interest given your age, time horizon, and liquidity needs. You should have a Tech Stock attorney, like the attorneys at Malecki Law in New York, review your account set-up and asset allocation.

Due to the downward trend, FANG stocks have caused the market to incur a $1,421 billion loss – META is down more than 40% YTD (year-to-date), AMZN is down more than 25% YTD, NFLX is down more than 68% YTD, and Alphabet is down 21% YTD. Stocks that were once idolized and encouraged to be in everyone’s portfolios, may take on a different meaning in the near future.

Malecki Law is watching this downward trajectory, as there may be red flags of some form of a new “Chip-Wreck.” Malecki Law was born in the “Tech Wreck” era, otherwise known as the “Dot-com bubble,” when the internet was adopted, causing internet-based startups to balloon the market which ultimately led to a pop and crash in the market in the early 2000s. Founder of the law firm, Jenice Malecki, had even worked on Wolf of Wall Street related cases. This is not a first for the law firm. If your brokerage accounts have been losing significant amounts of money due to FANG and/or tech-based stocks, you may have a viable claim that can be brought in the FINRA arbitration forum. You can set up a free consultation with a Tech Stock lawyer in New York, like the lawyers at Malecki Law, to analyze your potential claim.

Notably, once the infamous Tech Wreck crash hit the financial markets in the early 2000s, even well-known blue-chip tech stocks, such as Cisco or Intel, endured serious losses of up to 80% in value. These were the FANG stocks at the time. Financial markets tend to be repetitive creatures – if something happened before, it could happen again, the underlying financial assets at issue may just change. Brokers and financial firms know this and have the responsibility to remain up to date with financial and macroeconomic related current events, especially as it impacts their customer investors.

When your broker recommends investments to you, they must obtain your investor profile information, such as your risk tolerance and time horizon, among other things, to determine whether the investment is in your best interest, as required by Regulation Best Interest. Brokers should be keeping a close eye on market news, especially with regards to the stark change in value in the FANG stocks, as they may have been in your best interest years ago and may no longer be in your best interest now.

FANG stocks were generally and historically considered “safe,” which may not be the case going forward. As the investment landscape continues to rapidly change, parallel to rapid tech, AI, and chip-based changes, the obligation is on your broker to remain educated in order to make appropriate investment recommendations. If your broker recently recommended that you purchase FANG stocks, it may not have been in your best interest. If you suffered losses, you should reach out to a Tech Stock law firm in New York, like Malecki Law, to review your portfolio.