$3 trillion market value evaporated from five big-techs

According to Wall Street Journal on Sunday, the stock of FAANG, an acronym for five big tech corporations - Facebook parent Meta, Apple, Amazon, Netflix, and Google, shed more than three trillion dollars in market value.

WSJ explained the situation in its article titled “The year big tech stocks fell from the glory,” reading the slide of big-tech stocks that was especially large, as they reacted sensitively to changing interest rates. During the pandemic, technology stocks rapidly surged, with overflowing liquidity being pumped from governments around the world in an attempt to overcome the Covid-19 pandemic. However, these stocks were hit the hardest and plundered when the Fed took several interest rake hike measures last year.

Meta plunged 64% last year. The largest drop among the five big techs as companies cut the budget for digital ads amid rising concern for recession, and investors exiting Meta as the success of “Metaverse,” a key business sector of the platform enterprise, has become increasingly uncertain. The stock price fell as much as 70% during the second half of last year, but the fall reduced a bit when the company announced its plan to lay off 11,000 employees.

Many voiced concerns about poor consumer sentiment before November and December last year, usually the shopping peak of a year. Netflix stock declined 51%, affected by eroding subscribers base and slow settlement of its new advertisement-linked payment type. Amazon lost almost half of its stock value compared to 2021. Google experienced a 39% drop in market value as search ads declined. Apple’s value fell by 27%, losing a large portion of its production capability from Chinses lockdowns for Zero Covid.

S&P 500 indexes, mostly centering around large stocks, fell 19% last year versus the previous year, the worst since 2008 when the global financial crisis hit it. The share of FAANGs also reduced to 13% last year from 17% in 2021.

“When money is basically free…you’re willing to place a high value on future earnings, particularly growth stocks. That all changes when rates rise,” said Erik Knutzen, chief investment officer at Neuberger Berman. Given the current situation, experts say tech companies' stock prices would not rebound until the Fed stepped up to cut the interest rate.


Hyoun-Soo Kim kimhs@donga.com