The $3trillion tech sell-off: US giants rocked by losses in year of woe

So far this year, more than $3 trillion of the value of the US tech giants has been wiped out — a stock price that has sent shockwaves across the globe.

The sell-off – equivalent to the UK’s entire economic output – has hit billionaires and ordinary savers alike, attracted by the notable gains made in recent years by companies such as Apple and Amazon.

But equities have been hit hard by the obscuring economic outlook and the end of cheap money, as central banks around the world raise interest rates in a desperate – but so far failed – attempt to quell skyrocketing inflation.

The sell-off gained momentum yesterday when a disastrous series of quarterly earnings from Facebook owner Meta sent his shares down more than 20 percent, wiping out founder Mark Zuckerberg’s billions of dollars in fortune.

Analysts at broker Wedbush said so-called Big Tech risks “losing its luster” and that this week “would go down in the history books” as one of the industry’s worst earnings seasons. With all eyes on Amazon and Apple’s results last night, the broker warned that the coming months could be a fork in the road moment for the industry.

Meta’s dismal update also followed weak showings from both Microsoft and Google owner Alphabet earlier this week, fueling fears that the industry’s growth could grind to a halt. Wedbush analysts said that with a global recession “probably imminent,” the industry must “adapt quickly” or risk losing its desirability among investors.

Meta saw profits more than halved as fears about the economy forced companies to cut back on advertising, the main source of revenue.

Alphabet brought in £60bn in revenue in the three months to September, which fell below the £62bn analysts had forecast – again amid a slump in ad spend.

Microsoft outperformed, surpassing expectations with £43.7 billion in revenue, but investors were shocked by warnings that demand for its computers and other technology was declining amid a decline in corporate spending.

Big Tech stocks boomed during the pandemic as low interest rates made borrowing cheap and lockdown measures left consumers dependent on online shopping, while also spending a lot more time working from home, socializing online and streaming.

The trends allowed Netflix, Amazon, Alphabet, Microsoft, Apple, Meta, and Snap to benefit enormously, with shares of all seven companies hitting all-time highs last year.

But as the economic picture darkens, companies and consumers are cutting back on spending, leaving the tech giants struggling to meet investor expectations after the recent blazing pace of growth.

Aside from downturns in the market and spending, ad-dependent companies like Meta and Snap face stiff competition from the Chinese video-sharing app TikTok, which is increasingly attracting a large audience of mostly younger users, the main demographic that advertisers are targeting. want to focus.

The market reaction has been brutal, with total losses at the companies estimated to be around £2.7 trillion, ahead of Apple and Amazon earnings released overnight.

The industry’s market disruption has also wiped out billions from the fortunes of some of its most notable figures. Zuckerberg has seen the value of his 13.6 percent stake in the company fall by £73 billion so far this year. Amazon founder Jeff Bezos had lost £51 billion last night ahead of the company’s results.

Snap chief Evan Spiegel, who became the world’s youngest billionaire in 2015, has seen his 3 percent stake in the MMS app fall by £1.3 billion.

Snap rang alarm bells last week after warning it would not deliver revenue growth in the fourth quarter of this year, despite the period leading up to Christmas being traditionally a busy time for advertising.

Third quarter losses rose 400 per cent to £310 million, which the company said was ‘far from our ambitions’.