Why are US Tech Stocks Falling? 🥵

All international tech monopolies are drowning like anything. What's the reason? 🤔

Meta Platforms (Facebook) is down by over 75% from top

Netflix is down by over 59% from top

Amazon is down by over 48% from top

Alphabet (Google) is down by over 40% from top

There is one astonishing thing you might not have observed

European Union (‘EU’) and the United States of America (‘America’) both grow their GDPs at 1-2% p.a.

While the stock exchanges of the EU have barely grown from their levels 5 years ago,

But Dow Jones and other American indices have grown at a decent CAGR beyond the GDP growth of America

Why?

Because all these American Entrepreneurs have a mindset of Global Domination

We all use their products and our life is centred around them

But what is happening to the consistent compounders of Silicon Valley?

Why are these companies on a falling spree? Is someone going to take them over?

Perhaps no!

1. Change in privacy policies

Apple recently changes its privacy policies which have handicapped Meta to collect data of users the way it used to

This data was used to show ads to relevant users

Now, Meta is bleeding because of this

The Users as well as Revenue per user are falling sharply at Facebook

Zuckerberg is investing aggressively in Metaverse

And he doesn’t want to rely on Apple or Google for retaining privacy policies anymore

So, he is using Oculus to build Virtual Reality and other Metaverse products

Meta has guided further that they will continue to burn (invest) even more aggressively in quarters to come

2. What about others?

While Meta is falling because it is burning aggressively in Metaverse and its Facebook users and Revenue per User is falling sharply,

Others are falling because their revenue growth and guidance have been falling

It was expected that the 40-50% growth that these companies were reporting until last year will continue forever,

But unfortunately, those unrealistic expectations have been put at rest with the numbers being reported now

Alphabet Inc. reported a marginal fall in its YouTube revenue numbers lately

Why are these numbers falling?

It is probably because of recession fears

Inflation has been soaring like anything in the EU and America and people can’t afford to buy things they usually did

Hence, low revenue for businesses means that they will spend lesser on Ads

3. Too many people, too few work

Sundar Pichai, the Indian-origin CEO of Alphabet Inc. said a few months back,

”Google has too many employees but too few work”

These companies probably hired and retained employees at higher salaries during the last two years

The last two years were the years when funding was flowing like anything

Every other person was starting a startup and who else would be the most likely to receive funding?

Employees of these top tech companies, right?

So to avoid a labour shortage and cater to extra work they had during last two years, they must have retained and hired people at exorbitant salaries

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So, what are you going to do? Buy the US Tech crash? Or avoid as you think it is a trap?

Let us know in the comments section!

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Disclaimer: Not investment advice. Kindly refer your SEBI registered Investment Adviser before taking any investment decision