More than $550 billion (€552 billion) has been wiped off the value of the biggest US tech companies this week, with headlong growth stalling because of the slowing global economy and mounting cost pressures.
The stock market slump has underlined a surprisingly weak earnings season from the US digital giants, ending a surge in growth during the pandemic and putting paid to hopes that they would withstand the inflation and weakening growth that are hitting the wider economy.
Facebook’s parent, Meta, delivered the latest blow to Wall Street’s faith in the resilience of Big Tech late on Wednesday when it reported a slump in its profit margins on the back of slipping advertising revenue and soaring costs.
Wall Street’s loss of confidence in the progress of Mark Zuckerberg’s metaverse vision wiped 22 per cent from Meta’s shares on Thursday morning in New York, cutting $80 billion from its stock market value. It left Meta’s shares 73 per cent below the record they hit 14 months ago, and extended a two-day slump for Big Tech that began on Tuesday with weak earnings from Alphabet, Google’s parent company.
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Fears that Big Tech was doing too little to rein in its soaring costs were triggered when Alphabet said it had added nearly 13,000 new employees in just the last three months, one of its biggest hiring binges ever, despite a recent internal call from chief executive Sundar Pichai for the company to become more “focused” in its spending.
Like Meta, Google also said its massive capital spending would continue, intensifying the race by the biggest tech companies to meet the growing demands of AI.
The biggest stock market loser, Microsoft, saw $174 billion slashed off its market value by Thursday morning after signalling earlier in the week that growth in its cloud computing business was slowing faster than expected. The news added to fears that some of the businesses that were thought to be most resilient in a slowdown, including cloud computing and Google’s search advertising, were starting to suffer.
Between them, Alphabet, Amazon, Apple, Meta and Microsoft had lost $566 billion in stock market value by Thursday morning, leaving them with a combined value of $6.64 trillion. Amazon and Apple were due to report their earnings later on Thursday. — Copyright The Financial Times Limited 2022
