For anyone who watches the stock market for a living, the recent car crash in tech stocks has been mesmerising. There are plenty of reasons to believe it isn’t over.
This is not so much an issue for Big Tech, though the wealth erased since the start of the year is significant. Between them, the five biggest tech companies have shed nearly $2.6tn. That is a decline of 26 per cent, twice the drop in the Dow Jones Industrial Average.
There are still some serious questions. Amazon is suffering an uncharacteristically severe adjustment after a massive spending binge, while the issues facing Meta as the former Facebook tries to reposition itself as a metaverse company are little short of existential. But in general, Big Tech’s premium to the rest of the market has been largely erased and the companies’ defensive qualities are likely to show through in tougher economic times.
The axe is hanging, rather, over high-growth tech companies. This is where valuations became most stretched, and where the market is having most trouble finding its nadir. As investors grope for more appropriate financial yardsticks with which to judge these companies, as well as the right valuation multiples to apply to those metrics, volatility is likely to remain high.