Red, red, red: this was the color that prevailed on the stock display screens of Mega Tech on Wall Street on September 29th.
Everywhere investors looked, everything was ugly because worries about the various challenges facing technology companies are only increasing.
Investors are convinced that the economic slowdown and a probable recession will have a particularly negative impact on Big Tech’s revenues. Consumers should reduce their expenses and sacrifice purchases deemed unnecessary such as renewing a new phone or buying the latest technological gadget.
Companies are reducing their marketing budgets. Basically, the period of spending sprees is over for the time being for both households and businesses, which will affect Big Tech which tends to thrive in times of growth.
Apple Lost $119 Billion in 24 Hours
This picture was confirmed by a particularly negative report on Apple (AAPL) by Bank of America analysts who lowered their rating. Apple’s rating is now neutral vs buy previously and said their price target Apple is now $160 vs $185.
These Bank of America analysts added that they now anticipate “weaker consumer demand” over the next year and warn that there are many macroeconomic challenges. The dollar has appreciated significantly in recent weeks against many major currencies such as the British pound and the euro, which should reduce the revenue generated by Apple in international markets once these are converted into dollars.
They added that demand for Apple services — Apple Store, Apple Health etc– had already slowed and that the products will likely follow soon.
This pessimism was reflected in a drop of nearly 5% in Apple stock. The most valuable company in the world thus lost over $119 billion in market capitalization in one session.
The caution around Apple comes as the iPhone maker has just launched the iPhone 14. Will this smartphone enjoy the same sales success as previous versions? Investors seem to doubt it because the winds are not favorable to it.
Since January, Apple stock has lost 19.4% since December 31.
Apple has brought the rest of Big Tech in its wake.
Microsoft (MSFT) shares dropped 1.48%, resulting in $26.7 billion less market value. Alphabet (GOOGL) , Google’s parent company, fell 2.63%, translating to $4.41 billion less market capitalization. The e-commerce giant Amazon (AMZN) lost 2.72%, or $32.7 billion in market value less than the previous day. Electric vehicle maker Tesla (TSLA) meanwhile saw its shares fall 6.8%, translating to $61.35 billion in less market value, while social media giant Meta Platforms (META) lost 3. 67%, losing $14.1 billion in market capitalization.
In all, Mega Tech lost over $258 billion in market value in one session.
The difficulties of technology companies are clearly affecting the Nasdaq 100, the financial index they dominate. The Nasdaq 100 lost 2.8% on September 29. It is down 31% since December 31.
The horizon should remain gray for tech as the Federal Reserve has planned to continue raising interest rates to fight inflation, which is at its highest in 40 years. This aggressive monetary policy is likely to cause a so-called hard landing in the economy, in other words a recession, experts warn.
While Big Tech continues to dominate the ranking of the world’s most valuable companies, one of their members, Mark Zuckerberg’s Meta Platforms, has been ejected from the top 10.
Apple remains in first place, with a market value of $2.29 trillion, ahead of the giant oil tanker Saudi Aramco. The software juggernaut Microsoft is third with a market value of $1.77 trillion, followed by Alphabet with $1.28 trillion. Amazon is 5th with a market cap of $1.17 trillion, while Tesla is 6th with a market value of $840 million.
The market capitalization of Meta, the parent company of Facebook, Instagram and WhatsApp, is currently at $377 billion, making the company the 12th largest company in the world.