Tech stocks have plunged from their 2023 highs, after starting the year on a tear

• Tech stocks started the year on a tear – but have plummeted since July.
• The Nasdaq Composite is down 9% from its peak, with investors fretting once again about the Federal Reserve.

Techs' stunning early-2023 winning streak has ground to a dramatic halt over the past few months, with the sector plunging as investors fret about sticky inflation and higher-than-expected interest rates.

The Nasdaq Composite has dropped 9% since hitting its peak for the year on July 19 – while the S&P 500 Information Technology Index, which gauges the performance of IT companies listed on the benchmark index, has dropped 10% over the same period.

The plunge is a far cry from how tech performed between the start of January and the end of June.

The sector enjoyed an AI-fueled boom over the first half of 2023, with a surge by the "Magnificent Seven" group of mega-cap tech stocks powering both the Nasdaq and S&P 500 to massive gains.

But since the mid-July peaks, investors have started to fret once again about interest rates – with the Federal Reserve signaling it'll hold borrowing costs at their current level well into 2024 in a bid to crush inflation, which is still hovering way clear of the central bank's 2% target.

Chair Jerome Powell said earlier this month that the Fed now plans to "proceed carefully" with its campaign against soaring prices, but signaled it won't start slashing rates until the middle of next year.

The majority of investors don't expect the central bank to start loosening until July 2024, according to the CME Group's Fedwatch tool.

Higher interest rates tend to disproportionately affect tech and other growth stocks, because they're more reliant on borrowing cash to boost their future cash flows.