Et hasn’t been a good week for the big tech companies in the United States. Amazon, Alphabet, Apple, Microsoft, and Meta had come up with numbers — and investors weren’t thrilled. The prices of the stocks on the stock exchange fell, and violently: More than 950 billion dollars in market capitalization were destroyed. The golden days for the corporations seem to have at least paused, if not ended.
Especially during the pandemic, profits were bubbling up: more people bought online, advertised more, moved more activities to the cloud and communicated more online. In short: all user activities that boosted corporate sales and increased profits.
Now it is developing in the opposite direction: the global economic climate is cooling down noticeably. Cost pressure is increasing, as are interest rates. The corporations are suffering from the strong dollar, which is reducing foreign earnings. Although the current numbers are good, investors are expecting more – and the outlook for the coming months is particularly disappointing. Hopes that tech companies would be better able to fight inflation and weaker growth have been dashed. Even the cloud business and the digital advertising business, both of which were considered resilient, have taken a significant hit. These are the reactions to the balance sheets.
At Microsoft, the figures were better than expected: the revenues were $50.1 billion, an increase of eleven percent and thus better than analysts had expected. However, weaker growth is expected for the current quarter, and many business areas are paralyzed. The share price then fell from around $250 to around $225.
The Google parent company Alphabet also lost on a similar scale. The course fell from around $105 to $92. Operating profit of $17.14 billion and sales of $69.09 billion were below market expectations. Advertising money in particular was not flowing as plentifully as it had recently. Analysts criticize that Alphabet is not making any major efforts to save money, quite the opposite. In the past three months, 13,000 people have been hired, one of the largest hiring drives ever, despite a recent internal call from Alphabet CEO Sundar Pichai that the company needs to be “more focused” on its spending.
Almost all disappoint with their numbers
Amazon disappointed investors on Thursday with a weak sales forecast for the fourth quarter of the year – sales are expected to come in at just $140 billion, rather than the $155 billion forecast by analysts. The cloud business in particular is weakening – similar to Microsoft – as customers tried to curb their spending. Here, too, prices fell from around $120 to around $100.
Meta was hit the hardest though. The share price collapsed from around $130 to around $100, so the paper is now 75 percent below its high. Meta shocked investors. After all, profits fell by 52 percent to $4.4 billion. In addition, a lot of money is invested in the so-called metaverse, but the chances of success are uncertain.
Only Apple managed not to disappoint investors and to exceed analysts’ expectations. Bottom line, profit increased slightly to $21 billion. Apple is thus breaking away from developments at other tech giants, which are being hit by falling advertising spending or economic concerns. However, the stock fell slightly in after-hours trading.
Is this the permanent end of the boom?
Some, like economics professor Ken French, are already anticipating an end to the long-standing boom. In a long-term study, he proved that there were always phases in which so-called value titles dominated and phases in which so-called growth titles dominated. The English word “value” means “value”, such stocks have a stable profit development, above-average profitability and a good market position – an example is Coca-Cola. “Growth” means “growth” in plain English, and this refers to stocks such as tech stocks that show above-average growth. According to French, growth stocks are now converging on value stocks.
Some growth stocks could become value stocks, and others could even disappear from the scene altogether. Meta, for example, is not even represented among the 20 largest companies. This is a normal development, you only have to look at the world’s largest stocks over time, where there is a constant coming and going.