The mighty giants have fallen as the biggest US tech companies posted earnings reports that fell short of investor expectations and wiped nearly US$1 trillion in market value.
Driving the news: The companies that kept the stock market afloat over the last ten years proved they too, are just like us, and susceptible to inflation and rising interest rates.
- Ad-supported business models have faced disruption as regulatory woes plague the industry. In Europe, new rules will require consumer consent to sell data to Big Tech.
Why it’s happening: Disappointing earnings, slow growth forecasts and increased operational costs led to lost confidence in heavy hitter companies like Alphabet, Amazon, Microsoft and Meta.
- Amazon’s operational costs exceeded revenue for a fifth consecutive quarter, attributed to a surge in labour. The workforce has grown from 800,000 to 1.5 million since 2019.
- Alphabet and Meta saw declines in their primary revenue stream: ad sales. Both also expanded their employee pool by 50% in the last three years.
- Microsoft saw its slowest growth in five years as PC and cloud computing sales stagnated.
Yes, but: Apple managed to come out of the earnings bloodbath losing only $34 billion, beating analysts’ forecasts. Strong brand power and customer loyalty served as a tourniquet for the iPhone maker, which managed to swerve a sharp sell-off.
Why it matters: Whispers of another 2000’s “dot com bust” are on the wind, and while all things Y2K are trending, this is one event no one is interested in reliving. But it might be beyond anyone’s control at this point.
What’s next: Big Tech could be forced to foot the bill (which would eat into profits) for network expansion in Europe, as some telcos on the Continent push for companies like Amazon and Google to subsidize improvement to internet services.