Tech shares led a selloff Wednesday after lackluster earnings reports from two of the market’s most prominent heavyweights.

The Nasdaq Composite declined 3.6% and the S&P 500 fell 2.3%, both notching their worst daily percentage declines since 2022. The Dow lost 504 points, or 1.3%.

Big Tech’s decline comes after Tesla’s second-quarter results released Tuesday evening showed a second-straight decline in quarterly profit and that its profits plunged more than 40% from a year ago. The electric vehicle maker faces growing competition from established automakers domestically and internationally and a slowdown in EV sales growth.

Tesla shares fell 12.3% on Wednesday. The EV-maker didn’t give a new sales forecast for the year but warned that its vehicle volume growth rate this year could be substantially lower than that of 2023.

Elsewhere, Alphabet shares slid 5% after reporting a miss on expectations for YouTube advertising revenue.

“The flight to quality of Mega Tech is becoming vulnerable to earnings that cannot have even minor disappointments,” wrote Louis Navellier, chairman of Navellier & Associates, in a Wednesday note, adding that “the AI narrative isn’t broken.”

Wednesday’s tumble extends the decline in tech stocks seen during the past week after a cool inflation report and resilient economic data led investors to bet that the Federal Reserve will cut interest rates in September.

Wall Street has rotated out of the tech bigwigs that led stocks higher over the past year in favor of smaller stocks that have been beaten down by sky-high rates. The Russell 2000, which tracks the performance of US small-cap stocks, is up 7.6% for the month, outperforming the S&P 500’s 0.6% loss. Still, small-caps fell on Wednesday.

A confluence of other factors has also battered the tech sector recently. Investors have contended with an ongoing global tech outage that has left travelers stranded at airports, consumers at risk of getting duped by cybercriminals and brought computer systems across health care and government sectors to a halt.

The Nasdaq last week had its worst day since 2022, after the selloff in tech was worsened by a report from Bloomberg that the Biden administration is mulling plans to impose more sanctions on Chinese tech firms and to heighten semiconductor trade restrictions between the US and China.

As stocks settle after the trading day, levels might change slightly.

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