Business

Cruel week for Big Tech with $550 billion wiped out of valuation

More than $550 billion was wiped off the value of America’s biggest tech companies this week, with growth stalled for a long time due to a slowing global economy and cost pressures. increase.

The stock market slump highlighted an unexpectedly poor earnings season from US digital giants, ending a pandemic-era spike and stoking hope that they will withstand inflation. Weakened growth and development are affecting the broader economy.

Facebook’s parent company, Meta, dealt the latest blow to Wall Street’s confidence in Big Tech’s resilience late Wednesday when report a drop in profit margin due to falling advertising revenue and soaring costs.

Mark Zuckerberg faces a barrage of questions from Wall Street analysts about why his company plans to double down. its bet on artificial intelligence and the metaverse next year, despite the eroding ad business and the lack of any clear promise of when the big spending will pay off.

“There are too many test bets compared to the core proven bets,” said Brent Thill, an analyst at Jefferies.

In a note to investors, analysts at Morgan Stanley added that they had broken their normal practice of not immediately downgraded ratings in response to bad news because of spending plans. of the Meta was a moment of “change of opinion”.

Wall Street’s loss of confidence in the progress of Zuckerberg’s super-reverse vision wiped out 22% of Meta’s stock on Thursday morning in New York, slashing $80 billion from its stock market value. It sent Meta’s stock beating the record 73% it hit 14 months ago and extended a two-day slump for Big Tech that began Tuesday with Weak earnings from AlphabetGoogle’s parent company.

Concerns that Big Tech was doing too little to rein in its soaring costs were triggered when Alphabet said it added nearly 13,000 new employees in the past three months alone, one of the biggest hiring sprees since so far, despite a recent internal call from CEO Sundar Pichai to make the company more “focused” in its spending.

Like Meta, Google also said its massive capital spending will continue, accelerating the race of the biggest tech companies to meet the growing demands of AI.

The biggest loser in the stock market, Microsoft, saw a $174 billion drop in market value Thursday morning after signaling earlier in the week that growth in its cloud business slowed down faster than expected. The news added to concerns that some of the businesses believed to be most resilient to the downturn, including Google’s cloud computing and search advertising, are starting to take a hit.

Between them, Alphabet, Amazon, Apple, Meta and Microsoft lost $566 billion in stock market value on Thursday morning, leaving a total of $6.64 billion. Amazon and Apple will report their earnings late on Thursday.



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