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
—————————————————
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!
—————————————————
Like this content? Share this with your friends
—————————————————
Check out our courses on Basics of Stock Markets, Fundamental Analysis, Mutual Funds, Personal Finance and Value Investing
Thanks for reading :)
Disclaimer: Not investment advice. Kindly refer your SEBI registered Investment Adviser before taking any investment decision