CRASH ALERT: Experts Warn of Imminent 2008-Style Meltdown as Market Plunges
The market's sharp selloff has sparked fears of a potential crash, with investors scrambling to secure protection and seeking safer assets. The tech sector is particularly vulnerable to the market's volatility, and analysts are warning of a potential shift in the AI industry's focus towards return on investment (ROI).
As experts warn of an imminent 2008-style meltdown, the stock market is on high alert. The Dow Jones Industrial Average (DJI) plummeted 1.69% on Friday, February 21, its worst decline of the year. The S&P 500 (SPX) slid 1.71% to end at 6,013.13. Meanwhile, the NASDAQ Composite (IXIC) dropped by 2.2%, settling at 19,524.01. The stock market’s sharp selloff has sparked fears of a potential market crash and investors are scrambling to secure safer assets.
The volatility in the stock market is being driven by a combination of factors, including concerns over a slowing economy, sticky inflation, and the impact of proposed tariffs. The University of Michigan consumer sentiment index fell to 64.7 in February, a decline of nearly 10% and a steeper drop than expected, as consumers raised concerns about higher inflation ahead from possible new tariffs. The five-year inflation outlook in the survey was 3.5%, the highest since 1995.
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Prominent investor Steve Cohen warned of a significant correction, citing proposed tariffs dragging on the economy and some of the government’s cost-cutting efforts.
Cohen cautioned:
“It’s definitely a period where I think the best gains have been had and [it] wouldn’t surprise to see a significant correction.”
Jim Cramer also expressed caution, stating that it’s uncertain if the market’s bounce from Friday’s sharp selloff will take hold.
Cramer stated:
“I think the market is trying to bounce, but I don’t know if it’s going to take. There are a number of things working against the market, including declining GDP growth estimates and the drubbing of Palantir and other high-flyers.”
Falling Stocks:
Microsoft (NASDAQ: MSFT): Down due to a report suggesting that the company had canceled some U.S. data center leases, although the company later refuted these claims.
Nvidia (NASDAQ: NVDA): Down ahead of its earnings report on Wednesday, with investors worried about demand for technology supporting artificial intelligence.
Palantir (NASDAQ: PLTR): Down, with Jim Cramer citing the company’s decline as one of the factors working against the market.
Walmart (NYSE: WMT): Down 2.5% after issuing a weaker-than-expected forecast, which also soured the outlook for the consumer and the economy.
Eaton (NYSE: ETN): Down more than 2% due to its exposure to the power generation data center buildout plays, which were affected by the decline in Microsoft’s stock price.
Gaining Stocks:
Apple (NASDAQ: AAPL): Up after announcing plans to spend $500 billion in U.S. investments over the next four years, including setting up a factory in Texas for AI servers.
Berkshire Hathaway (NYSE: BRK.A): Up to record highs after reporting a record annual profit.
Procter & Gamble (NYSE: PG): Up 1.8% as investors sought safer assets, such as consumer staples.
General Mills (NYSE: GIS): Up more than 3% as investors sought safer assets, such as consumer staples.
Kraft Heinz (NASDAQ: KHC): Up more than 3% as investors sought safer assets, such as consumer staples.
Starbucks (NASDAQ: SBUX): Up 1.5% after CEO Brian Niccol announced plans to lay off 1,100 support workers to simplify the company’s corporate structure.
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The tech industry is particularly vulnerable to the market’s volatility, with investors worrying about demand for technology supporting artificial intelligence. Nvidia, the stock market’s heavyweight, is set to report results on Wednesday. However, investors are questioning the hefty spending on AI technology since low-cost AI models from China’s DeepSeek rattled the industry.
The VIX Index (CBOE: VIX), a tool that gauges expected S&P 500 volatility and is often called Wall Street’s fear gauge, surged by over 30% to just above 19. This rise indicates that traders are willing to pay a premium for put options, which are commonly used to safeguard portfolios against market downturns.
Analysts are warning of a potential shift in the AI industry’s focus towards Return on Investment (ROI) following the development of an open-source Language Learning Model (LLM) by China’s DeepSeek. The model performs on par with GPT-4o but requires significantly less computing power, potentially causing a shift in the industry’s focus towards more cost-effective solutions.
Edison Lee, an analyst at Jefferies, wrote:
“We have been highlighting our concern about AI’s ROI, as the massive investment in GPUs has generated little return. We have seen model improvement, but no concrete examples of AI monetization that could justify the investments.”
The market’s volatility is not limited to the tech industry and investors seeking safer assets such as consumer staples, utilities, and healthcare.
According to Larry Tentarelli, chief technical strategist and founder of the Blue Chip Daily Trend Report, Monday’s top 20 performers on the S&P 500 were all from defensive sectors, including consumer staples, utilities, and healthcare.
Tentarelli commented:
“Investors often rotate into these so-called defensive sectors when economic growth concerns appear.”
As the stock market continues to plummet, experts warn of an imminent 2008-style meltdown. The conditions are ripe for a crash, with high volatility, declining economic growth, and sticky inflation. The question on everyone’s mind is, is the stock market crashing, or will the market bounce back? Only time will tell, but one thing is certain: the market is in for a wild ride.
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Disclaimer: Wealthy VC does not hold a position in any of the stocks, ETFs or cryptocurrencies mentioned in this article.
