A Rough Stretch for the Cars of the Future Drags Down Tech Stocks

Technology stocks helped propel the nine-year bull market. Optimistic investors piled into the shares, hoping to grab a piece of the profits from industries such as social media, autonomous driving, video streaming and artificial intelligence.

Now, that confidence is evaporating.

Investors pummeled technology company stocks again Tuesday, knocking the Standard & Poor’s 500 index down 1.7 percent. The Nasdaq composite, laden with technology stocks, sank 2.9 percent after a flurry of bad news about specific companies metastasized into a broad retreat from technology stocks.

The sell-off was ignited when chipmaker Nvidia said it was suspending tests of its self-driving car technology after an autonomous Uber vehicle struck and killed a pedestrian in Tempe, Arizona, last week. Nvidia has made supplying chips to self-driving vehicles a major part of its growth strategy, and Uber had selected Nvidia to outfit its fleet.

The news sent Nvidia shares plunging 7.8 percent, the sharpest decline of any company in the S&P 500.

Shares of Tesla, a maker of electric-powered vehicles, also were in free fall, plunging 8 percent after the National Transportation Safety Board said it was investigating a fatal crash last week involving a Tesla vehicle in California. The board said it was unclear whether an automated driving system was operating at the time of the crash.

The investigation adds to the financial pressure Tesla is already facing, as it burns through cash and struggles to accelerate production of its Model 3 electric vehicles. Citing those challenges, Moody’s Investors Service downgraded its rating on the company’s bonds after markets closed Tuesday.

Across the technology industry, investors are suddenly anxious that intensified regulatory scrutiny is going to hurt profits and therefore stock prices. That spells trouble for the markets because tech companies have long been investor favorites. Facebook, Amazon, Netflix and Google’s parent company, Alphabet, have delivered some of the best returns to investors in recent years.

Those days are gone.

Facebook shares have become an investor punching bag, beaten up over worries that the social network became a tool for Russian interference in the 2016 election and has not adequately safeguarded its customers’ data. After enduring a sharp slide over the past month, Facebook’s shares fell another 4.9 percent Tuesday amid reports that Mark Zuckerberg, the company’s chief executive, would testify before Congress about the way the firm manages customers’ data. Roughly 18 percent of Facebook’s market value has been erased in the past two weeks.

Most of the major technology companies were big losers Tuesday. Netflix fell 6.1 percent, its sharpest decline since July 2016. Alphabet and Microsoft both dropped 4.6 percent.

The hammering of technology stocks is only the most recent source of market turbulence. Since February, a diverse crop of worries — such as the prospects of central banks raising interest rates quickly and concerns of a trade war derailing the economy — have unnerved investors. After years of being placid, markets have been on a roller coaster, routinely rising or falling by more than 1 percent in a single day. Because technology stocks until recently had been on such a tear, their recent stumbles are all the more painful for the broader markets. Since the start of the bull market in March 2009, the price of tech shares has soared more than 460 percent. The overall S&P index, by contrast, has gained 290 percent.

The S&P and other indexes are weighted by the market values of their constituent companies. In 2009, the tech sector made up 17.5 percent of the S&P 500. Today, that figure is more than 25 percent. As a result, the recent declines in the values of tech stocks has dragged the overall indexes down with them.