Jeff Bezos knew this day was coming. Back in April Amazon Boss caveat Regarding the imminent market slowdown, he tweeted that the spectacular tech boom he had experienced over the last two years could not last forever.
“Most people dramatically underestimate the attention of this bullan,” he said. “I can’t stop that … until it doesn’t.
“The market teaches,” Bezos added. “Lessons can be painful.”
For years, the tech industry has been leading the stock market with bankruptcy profits, backed by a pandemic that has driven much of the world online. Everything has changed now and trillions of market values have been lost in the last few weeks. Once-focused start-ups have been abandoned by investors, and even tech giants, who are considered stable investments, are declining.
Apple No longer the most valuable company In the world, after Lose This week’s market value is $ 200 billion.It joined many other tech companies in the slump that began in late 2021 and brought something bigger. Nasdaq Composite Index Decreased by more than 13% in April – a 30% or more reduction From the highest record of the previous year.
Meta Lost record The market value in February was $ 230 billion after a disappointing revenue report that revealed that the Facebook platform experienced its first user decline.Amazon report In the latest earnings report last month, it was the first loss since 2015.Alphabet income It was not enough In that first quarter report.Small-enterprise is also struggling, and the pandemic success story Peloton View stocks Demand for indoor exercise equipment plummeted by 20% this week as demand fell.
Employment freeze highlights post-pandemic slowdown
twitter publication In an internal note on Thursday, it was freezing new employees, and meta I did the same last week, Quotes expense guidance given in recent financial statements.Amazon Said In recent earnings announcements, the warehouse is “overstaffed” and does not consider layoffs, but “is working to improve it.”
Startups are seeing similar trends on the layoff tracking site Layoffs.fyi. Displaying Since the beginning of 2022, at least 55 tech companies have reported layoffs. Compared to just 25 companies in the same period in 2021.
Employment slowdowns occur even when the wider market is experiencing employment growth, Added 431,000 jobs in April.. According to Harris Anwar, senior analyst at Investing.com, the freeze indicates that the market boom was due to the confluence of unique factors and was not a long-term trend.
“Overall market sentiment has reversed from the very bullish sentiment seen during the pandemic. During that time, companies have seen a significant increase in demand. In the post-pandemic world, that demand is now. We are reaching a more normalized level, “he said.
When Covid-19 was a hit in early 2020, companies such as Peloton, Zoom, and Netflix grew rapidly as offices were closed and people were spending more time at home.zoom I saw its value It will explode more than 500% in a year recently Inventories have almost fallen to their pre-pandemic lows. Netflix, this Add more Over 36 million subscribers during the first year of the pandemic, lost More than half its value since reporting disappointing results on April 19.
Raji Shah, an analyst for digital transformation consultants, says that this type of growth cannot be predicted or sustained forever. Publicis Sapient..
“Revenues are declining, costs are increasing, and tech companies do what everything else does in this situation. Cost reductions due to job freezes, cost reductions such as unused real estate, productivity. Promotion of improvement, reexamination of investment, “he said.
“Is this a tech bust? I haven’t seen it yet,” he added.
Experts say that the recovery of the pandemic is not the only factor slowing the rapid growth of tech companies. The war in Ukraine affected advertising costs and accelerated supply chain problems already caused by the pandemic. This is the difficulty cited in many recent earnings calls.
“The war in Ukraine, a true tragedy at the humanitarian level, has also affected our business,” said Meta CEO Mark Zuckerberg, investing in the first quarter earnings report. Said on the phone with my house. “We have been blocked in Russia and decided to stop accepting ads from Russian advertisers around the world. After the start of the war, we also saw a global business impact.”
Brian Weezer, Global President of Business Intelligence at GroupM, said such headwinds are likely to surprise investors, accelerating the slowdown.
“Currently, there are overwhelming fears and concerns that many decision makers have about everything financially,” he said. “War certainly catalyzed much of it, but inflation and supply chain issues were already a problem.”
Inflation in the United States exceeded expectations in April, approaching its 30-year high of 8.3%. Inflation has a wide impact on consumer spending and can have a significant impact on companies that rely on e-commerce.
The Federal Reserve continue Raising interest rates until the economy goes into recession has further influenced investor decisions, as many people shy away from high-growth tech stocks, Anwar said.
“The market is always thinking ahead,” he said. “Many investors are acting as if depression was a deal. Will it happen? That’s a big question mark. But that’s what we see as an escape from these stocks. That’s why. “
The slowdown in technology is not limited to traditional markets.Cryptocurrencies have caused a tumult this week, with Bitcoin well below $ 30,000 for the first time in almost a year and clearing more than $ 200 billion from the wider market, some say. declaration That “cipher is dead”.
Crypto’s stumbling block is partly due to the recent market turmoil when the popular “Stablecoin” called TerraUSD collapsed. Stablecoin, A type of digital currency It is fixed at the US dollar and is considered to be less volatile than traditional cryptocurrencies.
Tammy da Costa, Analyst, DailyFXAs evidenced by the collapse of Terra, coupled with disastrous earnings reports from the major crypto exchange Coinbase.
“The main concern is that many retailers are investing in Bitcoin and crypto to get higher returns in a low interest rate environment,” he said. “Now, as price pressures rise and living costs continue to rise, fears [have raised] Systematic shocks can occur as large institutions continue to withdraw funds from their crypto portfolios. “
Aside from the blunders of digital currencies, the same market powers that affect big tech companies could be affecting digital currencies, Wieser said. Cryptocurrencies have traditionally been considered separate from the market, but they cannot escape the war and other major headwinds in Ukraine.
“Higher interest rates make everyone more aware of their investments and the choices they make when it comes to momentum-based assets,” he said. “It doesn’t take long to send these kinds of markets in the other direction.”
Decelerate, not slump
Many are panicking, but Wieser quickly realizes that these companies aren’t failing. The explosive growth seen in the last two years is unsustainable.
“Deceleration is not the same as decline,” he said. “If you grow 20-30% and then suddenly grow 10%, it may feel like a big change, but it’s not a crash.”
While tech companies seem to be delaying hiring patterns, there are still no signs that mass severance of large companies such as Meta is imminent. twitterAnd Amazon – Everyone has stated that they have no plans for miniaturization.
Still, there are rumors that big cuts are imminent for small businesses. “The next 6-8 weeks will be bloody.” Tweet JD Ross, Co-founder of the music investment platform Royal. “I’ve heard rumors that many companies are preparing to dismiss 20-40% of their team.”
The slowdown comes from a confluence of factors affecting companies across the market, said Shah of Publicis Sapient: inflation, war in Ukraine, supply chain predicament, and changes in consumer behavior. Leading tech companies will probably continue to be “safe ports.” It will be woven into our digital life for a long time and will be more likely to survive the market storm. However, it is not yet known how the larger industry will change.
“High-tech stocks have become bumpy vehicles,” he said.