Home Technology Inflation and Looming Recession Wipe $3.2 Trillion Off Tech Giants’ Value

Inflation and Looming Recession Wipe $3.2 Trillion Off Tech Giants’ Value

by Atlanta Business Journal
  • The biggest tech stocks have shed about $3.2 trillion in value this year.
  • The market cap of “GAMMA” stocks is down by more than $300 billion this past week.
  • The effects of inflation and signs of a possible recession have hit companies’ earnings and outlook.

The value of some of America’s biggest tech companies has fallen more than $3.2 trillion this year following another bruising week as investors punished disappointing results and forecasts.

“GAMMA” stocks — Google, Apple, Microsoft, Meta, and Apple — posted collective declines of more than $300 billion in their market capitalizations this week as quarterly results revealed mixed fortunes.

Amazon’s value sank by $170 billion this week after a steep downgrade to its outlook for holiday sales, in a clear sign that consumers are beginning to tighten their belts.

Google’s parent company Alphabet, meanwhile, is worth $80 billion less than it was on Monday as it surprised investors with a slowdown in digital advertising – another reminder that a recession looms on the horizon.

Microsoft, meanwhile, posted its slowest revenue growth in five years on slowing computer sales. 

Major tech stocks battled against soaring inflation at the start of the year, which hurt investor confidence about their ability to pass on rising costs to customers.

Signs now point to a recession, which Bloomberg economists are certain will happen next year. Those fears have taken the place of rising prices as the main measure of gloom. 

The Federal Reserve’s hawkish response, having raised rates by another 0.75% last month in a bid to combat inflation, is weighing on confidence. 

Apple managed to buck the trend and added $178 billion to its market value on Friday after better-than-expected fourth-quarter profits. Shares jumped 7.5% to close at almost $156, leaving the iPhone maker worth $2.5 trillion, but the stock has still shed almost 15% this year.

Apple’s performance stands in contrast to this week’s 14% decline for Amazon, 22% collapse for Meta, 5.4% tumble for Alphabet, and a 3.3% dip for Microsoft, bringing its year-to-date decline to almost 30%.

Nevertheless, analysts say the tech giants remain good investments. 

“Longer-term, Amazon should benefit from steady margin expansion driven by the continued growth of its cloud and ads businesses,” Wedbush analyst Michael Pachter wrote in a research note. Its stock has dropped almost 40% this year.

Meta may face a tougher battle as CEO Mark Zuckerberg fights the Facebook owner’s declining fortunes. It lost another $80 billion in value this week to $266 billion after posting its first quarterly revenue drop. Meta stock is down 70% since the start of this year.

As of Thursday, Zuckerberg’s net worth had tumbled by $81 billion since Facebook rebranded to Meta, with the company continuing to pile money into the loss-making Reality Labs, while its profitable social media arms shed users.

“The Facebook owner is battling a downturn in business confidence which is showing up in lower ad revenues and the Pied Piper tunes of TikTok which are luring potential younger customers away in their millions,” wrote Susannah Streeter at Hargreaves Lansdown.

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