It's been a tough year for many of the mega-cap tech stocks hurt in part by rising interest rates and an increasingly hawkish Federal Reserve as their valuations are more sensitive to higher interest rates. Technology stocks are on track for their worst December since the dot-com bubble burst two decades ago.
For some investors, this year’s rout in high-flying technology stocks is more than a bear market: It’s the end of an era for a handful of giant companies such as Facebook parent Meta Platforms Inc. and Amazon.com Inc.
Virtually all stocks in the Nasdaq 100 slumped on Thursday, with trading volumes soaring 14% above their 30-day average, hardly the typical pre-holiday doldrums. More than a tenth of the stocks in the 100-member benchmark hit 52-week lows on Thursday, including Amazon.com Inc., Airbnb Inc., PayPal Holdings Inc., and Zoom Video Communications Inc.
The Big Tech cohort (AAPL, MSFT, GOOG, AMZN, TSLA, META & NVDA) has collectively shed nearly $4.9 trillion of the market cap during the course of 2022.
It has been a brutal year for the leading companies of Silicon Valley as shown in the chart below bear market in the major big tech companies with apple declining around 25%, Microsoft declining 29%, google declining 39%, Nvidia declining 49%, meta declining 65%, and tesla declining 66%
Companies known along with Apple Inc., Netflix Inc., and Google parent Alphabet Inc. as the FAANGs led the move to a digital world and helped power a 13-year bull run. But history shows that market leaders of one era almost never dominate the next one. There are early signs that a shift is already underway Growth has slowed or evaporated for Netflix and Meta, while the sheer size of Amazon, Apple, and Alphabet means they’re unlikely to provide the huge returns in the future that they did in the past.
Broader worries about the economy and advertising spending are hurting the sector. Analysts see profits for the industry contracting by 1.8% next year, compared with expected growth of 2.7% for the broader US market, according to data compiled by Bloomberg Intelligence. Short interest in the Invesco QQQ Trust Series 1 exchange-traded fund is hovering at 6.2% of shares outstanding, a level last seen in 2012, data compiled by IHS Markit show.
As the risk of a recession and a drop in consumer spending grows, companies across industries are signaling that they are cutting costs and either slowing or laying off workers as the year 2023 approaches. In November, the technology sector announced 52,711 job cuts, reaching a total of 80,978 this year, according to data from executive outplacement firm Challenger, Gray & Christmas.
The content published above has been prepared by CFI for informational purposes only and should not be considered as investment advice. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell. The information provided does not have regard to the specific investment objectives, financial situation, and needs of any specific person who may receive it, and is not held out as independent investment research and may have been acted upon by persons connected with CFI. Market data is derived from independent sources believed to be reliable, however, CFI makes no guarantee of its accuracy or completeness, and accepts no responsibility for any consequence of its use by recipients.