Big techs lose nearly $1 trillion in brutal earnings week

Nearly $1 trillion has been wiped out of the value of America’s biggest tech companies this week, with previous growth stalled because of a slowing global economy and mounting cost pressures.

Stock market losses accelerated Thursday night after Amazon shocked Wall Street with a poor revenue forecast for its all-important fourth quarter of the year, when holiday shopping typically bolsters its earnings. . The US e-commerce company indicated that revenue for the period is likely to be $15 billion down from the $155 billion that analysts had forecast.

The news extended a surprisingly weak earnings season for major US digital groups, ending the surge in growth during the coronavirus pandemic and dashing hopes that they would weather the inflation and weakening growth that are hitting the broader economy.

The biggest loser in the stock market was Microsoft, with $243 billion reduced from its market cap in late Thursday trading, after signaling earlier in the week that growth in its cloud computing business was slowing faster. than expected. The news raised fears that some of the businesses considered most resilient in a downturn, including cloud computing and Google’s search advertising, were starting to suffer.

Amazon’s pessimistic forecast extended the problem to the e-commerce sector and cut more than $200 billion off the market value of the company’s shares. Only Apple managed to weather the dismay, with late Thursday news of earnings and earnings above analyst expectations, though its shares fell slightly as investors nervously waited for a financial forecast later in the day.

Facebook parent Meta dealt one of the biggest blows to Wall Street’s faith in Big Tech’s resilience Wednesday night when it reported a drop in its profit margins due to shrinking ad revenue and rising costs. .

Mark Zuckerberg faced an avalanche of questions from Wall Street analysts about why his company planned to double down on artificial intelligence and the metaverse in the next year, despite erosion in the advertising business and a lack of clear promises about when the massive spending would pay off. .

Echoing the cautious mood at the end of a troubled earnings release, Brent Thill, an analyst at Jefferies, said: “There are far too many experimental bets versus proven bets at the core.”

In a note to investors, analysts at Morgan Stanley added that they were breaking with their usual practice of not issuing immediate ratings downgrades in response to bad news because Meta’s spending plans were a “thesis change” moment.

Wall Street’s loss of confidence in the evolution of Zuckerberg’s metaverse idea wiped out 24.6% of Meta shares on Thursday in New York, cutting $84.6 billion off the market value of its shares. That left Meta shares 74% below the record they reached 14 months ago and prolonged a two-day slump for big tech that began Tuesday with weak profits from Alphabet, Google’s parent company.

Fears that big tech was doing too little to contain its soaring costs were sparked when Alphabet said it had hired nearly 13,000 new employees in the past three months alone, one of its biggest hires ever, despite a recent internal communication from the chief executive, Sundar Pichai, for the company to be more “focused” on its spending.

Like Meta, Google also said its massive capital expenditures would continue, intensifying the race of the biggest tech companies to meet the growing demands of AI.

In all, Alphabet, Amazon, Apple, Meta and Microsoft all lost $566 billion in market value Thursday morning, but the decline accelerated later in the day as Amazon’s revenue forecast hit an already nervous Wall Street, bringing total losses to $954 billion. The drop left the five companies with a combined value of $6.25 trillion.