The last three months were not good for large public technology companies. In the midst of criticism of monopolistic power, these companies saw a loss of market value. The unbridled sale has weakened, at least for now, so it's a good time to ask: what's next?
About Zachary Karabell is a WIRED contributor and president of River Twice Research.
This was hardly the first price decline of these companies and will not be the last. However, there are good reasons to believe that this is more than just a periodic market correction. It signals the realization that these companies are maturing, facing new challenges from within, from each other, from changing macroeconomic winds and from regulators. The massive rise in stock prices this summer may not have been a last hurray, but it's likely that this last euphoria phase will come to an end.
During the summer, tech investors ̵
In October, however, it collapsed and collapsed. Nvidia fell 50 percent from its high, Netflix 40 percent, Facebook 35 percent, Amazon and Apple 25 percent and Google 20 percent. In fact, the only tech giant that had not fallen significantly was Microsoft, which seems to take Apple and Amazon by storm as the most valuable company in the world.
It's always funny to read a lot in the stock market. Sometimes they predict something; they often do not predict anything. A common joke is that the stock market has forecast eight of the last five recessions. Many investors, both short and long term, have been making money from tech stocks over the last 12 to 18 months. Some profit taking was long overdue.
However, there is a good reason to keep in mind what has changed in Big Tech beyond recent stock moves.
Every big tech company now faces real questions, albeit not ones. Amazon and Google seem to focus on regulatory challenges. Apple, more than 10 years after the launch of the iPhone, is turning into a luxury brand with rising revenues from services. While Netflix continues to grow at double-digit rates, it will face increased competition and significant debt. And of course, Facebook is in a world of injuries that is losing the trust of the public and investors.
But look at who is not on this list: In recent months, Microsoft's stock has almost outperformed the S & P 500 stock index everything else has collapsed. What distinguishes Microsoft is the fact that 20 years ago, it came to the moment of coming to Jesus, with years of bad publicity over his aggressive business tactics and a massive US government cartel lawsuit that survived, but only after a judge arrived Having arranged a certain point the company has dissolved. In parallel with the bursting tech bubble in 2000, Microsoft's woes continued over the years as it struggled with the vision, with the transition from Bill Gates to Steve Ballmer and an investor base that astounded the company's future appreciation.
] That may now apply to the FAANG companies. They remain dominant and extremely profitable. It's not that much. The stock markets, however, do not burden companies just because they make a lot of money. Investors' growth is more heavily used by investors than consistent cash flow. As a result, Workday Personal Resources software manufacturer, with annual sales of approximately $ 2 billion, has the same rating as the insurance company Aflac (the duck-advertising company). which has an annual turnover of about 22 billion US dollars. This is also a major reason why investors in Apple are making a sharp split that generates far more money than they can spend, but their future trajectory will not look like it has in the past.
Business is Ripening to Make Business Even More Difficult If regulators in Europe, and perhaps soon in the US, examine them more closely, the relatively open global economic order on which they are built appears to be collapsing. That's why chipmaker Nvidia was valued at nearly $ 200 billion by the end of the summer and is now worth about $ 100 billion. The drivers of its growth, from the brief explosion of bitcoin mining to graphics cards, are being challenged as concerns over trade wars converge with rising interest rates.
So we are after the case. With markets becoming unpredictable and unpredictable, it should come as no surprise to see many of these companies rise 10 percent by Christmas – or if trade concerns continue to grow. The bigger problem is that we are entering a new phase of uncertainty and legitimate confusion about what happens next.
This is more than a problem for the financial markets and for investors who own these companies. Their growth and compensation strategies depended on rising stock prices, as everyone who was given options knows. The valuation of these companies also affects the venture capital market and the valuation of private companies such as Uber and Airbnb, which will soon have to go public. There may be no crisis, but many assumptions are upside down.
A kick to complacency is not necessarily a bad thing and can ultimately be to the best. If anything, we should welcome this moment as a call for more urgent reinvention. The larger and more profitable the companies become, the less robust they are in the face of market turbulence, just as large empires tend to become less secure as they have more to lose. We should hope that business models are recalibrated and adjusted, as well as investor expectations. It would be even worse if too many of these companies continue to fall down and defend the already won lawn. We will see next year's trend, but one thing should be clear: Tech Land is entering a new phase, with as much uncertainty as it has been a long time ago.