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Nearly $1tn 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 losses accelerated late on Thursday after Amazon shocked Wall Street with a weak revenue forecast for its all-important fourth quarter of the year, when holiday shopping normally buoys its revenues. The US ecommerce company indicated that revenue in the period was likely to be as much as $15bn below the $155bn analysts had been predicting.
The news extended a surprisingly weak earnings season from the huge US digital groups, ending a surge in growth during the coronavirus pandemic and putting paid to hopes that they would withstand the inflation and weakening growth that are hitting the wider economy.
The biggest stock market loser was Microsoft, with $243bn slashed from its market value by late trading on Thursday, 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.
Amazon’s downbeat forecast extended the pain to the ecommerce sector and cut more than $200bn from the company’s stock market value. Only Apple managed to withstand the disappointment with news late on Thursday of revenue and earnings above analysts’ expectations, though its shares slipped slightly as investors waited nervously for a financial forecast from it later in the day.
Facebook’s parent, Meta, delivered one of the biggest blows 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.
Mark Zuckerberg faced a barrage of questions from Wall Street analysts about why his company was planning to double down on its bets on artificial intelligence and the metaverse next year, despite an eroding advertising business and a lack of any clear promises about when the massive spending would pay off.
Echoing the wary mood at the end of a fractious earnings call, Brent Thill, an analyst at Jefferies, said: “There are just too many experimental bets versus proven bets on the core.”
In a note to investors, analysts at Morgan Stanley added that they were breaking with their normal practice of not issuing immediate ratings downgrades in response to bad news because Meta’s spending plans were a “thesis-changing” moment.
Wall Street’s loss of confidence in the progress of Zuckerberg’s metaverse vision wiped 24.6 per cent from Meta’s shares on Thursday in New York, cutting $84.6bn from its stock market value. It left Meta’s shares 74 per cent blow 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.
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.
Between them, Alphabet, Amazon, Apple, Meta and Microsoft had lost $566bn in stock market value by Thursday morning, but the slide accelerated late in the day as Amazon’s revenue forecast hit an already nervous Wall Street, taking the total losses to $954bn. The slide left the five companies with a combined value of $6.25tn.
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Image and article originally from www.ft.com. Read the original article here.