All but one are high-profile tech companies.
The Dow Jones Industrial Average (DJIA) rose by over 3% in August. That was because of a generally good earnings season, tempered by lingering concerns about the effect of tariffs on U.S. businesses and consumers. Another minus was a sell-off in stocks associated with artificial intelligence (AI) due to fears that swollen valuations wouldn't be matched by the financial benefits promised by AI.
As in any month with any index, however, there were some laggards among the 30 DJIA component stocks. Let's take a brief look at the five worst performers in August, arranged in order from steepest decline to narrowest: Microsoft (MSFT 1.82%), Caterpillar (CAT -0.07%), International Business Machines (IBM -1.39%), Amazon (AMZN -0.74%), and Nvidia (NVDA 0.43%).
Image source: Getty Images.
1. Microsoft (down 5%)
The slumping sentiment on AI titles took a bite out of Microsoft. That wasn't random — the company has directly invested billions of dollars in one of the technology's leading names, ChatGPT developer OpenAI. Some investors surely felt nervous about that level of commitment, although the software incumbent has massive financial resources and can absorb even a large loss from the OpenAI stake.
These worries feel overblown. A story published mid-month in The New York Times indicated that OpenAI was in discussions with unidentified buyers to sell $6 billion worth of employee shares. This would value the company at around $500 billion, a staggering amount for a business that's still privately held.
2. Caterpillar (down 4.3%)
The summer earnings season was hot and uncomfortable for Caterpillar. Near the start of August, the storied industrial company unveiled its second-quarter results. Investors were unhappy that it missed on earnings, although its top-line beat was rather convincing.
Tariffs were a major worry for Caterpillar, as the company might continue to book significantly higher costs for materials used to manufacture its goods. Sure enough, toward the end of the month, it all but confirmed that it was expecting to eat more expenses this year because of the levies — it revised its annual estimate for tariff impact to a range of $1.5 billion to $1.8 billion. Previously, it had set this at $1.5 billion.
3. IBM (down 3.8%)
Since IBM has pushed hard into AI, it's little wonder that investors traded out of the veteran IT company during the great AI scare of the summer. IBM is neck deep in the segment, channeling big chunks of capital into building out data centers capable of supporting the technology. It's buttressing this with software, hardware, and services and is something of a pace-setter in enterprise AI.
The downside of this, of course, is that when AI is out of favor with the market, so is IBM. Personally, I like the company's clear focus on the technology, and I admire how it has managed to shape a thriving, corporate client-targeted business around it. The sell-off in this stock, then, feels unjustified.
4. Amazon (down 2.2%)
Amazon seemed to barrel into August on a high note. After market hours on the final trading day of July, the company published second-quarter figures that beat the consensus analyst estimates, particularly for net income.
A big asterisk next to this, however, was the performance of the company's powerful growth engine, Amazon Web Services (AWS). Sure, the market-leading cloud services unit booked a nearly 18% year-over-year increase in revenue during the quarter, but that lagged well behind the 32% rise of Alphabet‘s Google Cloud and — ahem — Microsoft Azure's 39%.
5. Nvidia (down 2.1%)
Given the August AI slump, it really wasn't the best month to be the company so readily identified as the top facilitator of the technology. Nvidia's advanced processors are the go-to products for building out AI capabilities, and with the mini-revolt by investors, the company had little chance of avoiding the fallout.
This was exacerbated by Nvidia's second-quarter earnings release, which came in the waning days of the month. The company showed impressive revenue growth, as per its habit of late, but topped the consensus analyst estimates only slightly. With such lofty valuations and still-big hopes pinned to the future of AI, investors were clearly expecting far better.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, International Business Machines, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
