Persistently unprofitable gig-economy firms look shakier. Geopolitical rifts may even lift Palantir, a secretive analytics firm that works with security services, whose share price plunged by 20% on May 9th after it disclosed slowing sales growth. Cyber-security firms, such as CrowdStrike or Palo Alto Networks, could see their fortunes return thanks to fears of Russian and Chinese cyber-attacks. Hard though it may seem given Coinbase’s crash on May 11th, so may payments and crypto platforms, which have joined the financial mainstream. Makers of business software with steady sales and high margins, such as Adobe, Oracle and Salesforce, may rebound fast. Intel, a veteran chipmaker, is down by a relatively modest 13% since November. More unexpectedly, older tech and hardware stocks seem in decent nick, Mr Ives notes. Collectively, Alphabet, Amazon and Microsoft, the world’s three biggest cloud providers, took in $43bn of sales for such services in the first three months of 2022, up by 33% from a year earlier. Their core businesses are still growing-in particular cloud computing. Together they booked $359bn in quarterly sales and $69bn in net profits. Although the combined market value of America’s tech titans-Alphabet, Amazon, Apple, Meta and Microsoft-has dropped by nearly 25% since November and their latest results were less stellar than in earlier quarters, they remain safe bets. As interest rates go up, he argues, investors will turn their back on more speculative growth stocks and focus on the quality names in tech. According to Daniel Ives of Wedbush, another investment bank, the tech industry is at a “fork in the road”. There is more of a consensus over what could happen when the dust has settled. Just as markets have overshot in the past few years, they can undershoot. How bad will things get? Although stockmarkets have stabilised a bit in recent days, no one is ready to call the bottom. If inflation does not come down, central banks will pile on more rate rises, putting further pressure on risky tech stocks. Besides possibly triggering a downturn, they reduce the present value of tech companies’ profits, most of which lie far in the future. Now people are turning away from screens and leaving home again the war in Ukraine is creating paralysing uncertainty and economies around the world are suffering from inflation and soon, perhaps, recession. In recent years more than one factor gave tech a boost: the coronavirus pandemic pushed life and work online government stimulus programmes further increased demand and super-loose monetary policy made tech’s long-term growth more attractive to investors. The industry has suffered from an abrupt reversal of fortunes, explains Mark Mahaney of Evercore ISI, an investment bank. Sales of NFTs in ether, another big cryptocurrency, have dropped by more than half in recent weeks on OpenSea, a big NFT marketplace. Non-fungible tokens ( NFTs), even more speculative titles to digital assets such as art that can be traded, have been hammered, too. The next four biggest coins have lost more than 70% since their peak. Other digital monies have shed even more value. On May 12th bitcoin, the largest cryptocurrency, was trading below $26,000, less than half its peak in early November. Even some hardened “hodlers” have been getting cold feet. On May 12th SoftBank, a Japanese tech investor with a penchant for risky bets, most of which are private, reported that its flagship funds lost an eye-watering $33bn in the past 12 months.Īlthough they were meant to reach the Moon no matter what, cryptocurrencies are also coming a cropper. The unicorn boom’s superstar investors have been walloped. The amount of capital invested dropped by 19%, the biggest quarterly decline since 2012. Between January and March this year the number of transactions fell by 5% compared with the previous quarter. CB Insights, a research firm, reckons that tech startups raised $628bn globally in 2021 in more than 34,000 deals. According to an index that tracks the 25 largest de- SPACed vehicles, they have lost 56% of their value since the beginning of the year.Īs tech shares crash, they are pulling valuations of private firms down with them. Many of those that have done deals have lost their shine. Of the more than 1,000 such firms that have floated in America since 2018, only a third have merged with a target. The boom in SPACs, which go public and then find a startup with which to merge, has imploded. From January to April 2021 some 150 companies went public in America, most of them techie. As a group, the largest newly listed firms are worth 38% less than at the start of the year (see chart). Those of Peloton, which makes internet-connected exercise bikes, have lost over 90% of their value from their peak. The shares of Robinhood are 80% below the level at which the retail-trading app went public in July 2021. High-flying startups that went public in recent years have been hit hard, too.
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