The Big Sale of Tech Companies is the Specter of the Global Crisis

There was no such thing for a long time. Among the top 100 US listed companies, the four worst-performing companies of the last week of October were Microsoft, Google, Amazon, and Meta Platforms. What caused this big sale of tech companies?

Everything results from a series of quarterly earnings reports by major US tech companies released last week. Effect? Meta Platforms (Facebook) shares fell by over 23% during the week, Amazon by 14%, Alphabet (Google) by around 6%, and Microsoft by 4.5%.

The last week was full of critical financial events. It included quarterly financial reports of the largest technology companies. That, in turn, resulted in a big sale of tech companies.

Facebook Cheapest in Six Years

It began on Wednesday, October 26, one day after Microsoft and Alphabet published their quarterly financial reports. Shortly after the release, Microsoft shares fell by more than 8%, a significant drop for such a large company. On the same day, Google’s shares depreciated almost 10%, also caused by the company’s quarterly financial report. Google shares hit their lowest value since January 2021.

Este big sale of tech companies continued the next day (October 27). Meta Platforms outranked them all, which fell by more than 25% in one day. The drop was so drastic that the company recorded the weakest quotations since January 2016. Thus, Facebook shares are the cheapest in over six years. The current big sale of tech companies is the perfect moment for investors to trade on SimpleFX app. Such an opportunity to cheaply trade shares of Facebook or Google has not happened for a long time.

In turn, Amazon ended the week with price reductions in the valuation of technology companies. On Friday, October 28, Amazon’s share fell 12%, hitting the lowest valuation since the pandemic through April 2020.

The Big Sale Of Tech Companies Ignores Positive Facts

Is this surprising series of stock sell-offs just a reaction to quarterly earnings? The case is questionable. On the one hand, investors were disappointed with the results of GAFA’s quarterly reports. For example, Amazon forecasts lower-than-expected results for the most crucial quarter, including the holiday shopping season.

On the other hand, the market stubbornly ignored any positive financial results of the company founded by Jeff Bezos, including higher quarterly profits.

So what is this all about? Not how investors reacted to specific facts, but rather what reality they want to create. Remember that the market selects the stimulus to which it intends to respond. What the market hacks for itself from the reports is what it wants.

The Big Sale Of Tech Companies. Is it time to make the valuation accurate?

It is common for the world’s largest tech companies to lower forecasts for the next quarter. We all know that there is an economic slowdown, and most companies are doing so. However, earlier it did not entail a big sale of tech companies like this. Investors have concluded that tech companies are overpriced. Remember that the high valuation of shares in companies such as Facebook, Alphabet, or Amazon is a memory of the times of low-interest rates. And now they are gone.

The Crisis Will Hit The B2B Model

Looking at the fall in Google and Facebook stock prices, you can easily see a common ground. Both have business models based primarily on services provided to other companies (B2B). Investors predict the economic crisis will hit them the hardest for two reasons.

During the economic slowdown, advertisers are cutting their marketing and advertising budgets. It directly hits companies that earn on this basis, ie, in the case of GAFA, it will be Google and Facebook.

In addition, it is the same with other services, such as cloud services, on which Amazon is based with its Amazon Web Services. This activity shows that Jeff Bezos’s company has recently made huge profits. It is similar to the Microsoft case, which was reflected in the distrust of investors. The market predicts that tech companies running will turn out to be worse. And that is why there are such significant discounts.

Microsoft goes down after publishing its earning report (Source: SimpleFX)

Only Apple Goes Up – One Main Reason

Apple was less hit, although we can find weak points in their earnings report published on Thursday, October 27. Apple shares rose 4%, excluding the company from the big sale of tech companies. Where did this reaction come from?

Well, the priority recipient and customer of Apple products is the consumer. Its business model is radically different from other GAFA companies. It seems like the market assumes that companies will take a more brutal blow from global inflation.

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This post contains sponsored advertising content. This content is for informational purposes only and is not intended to be investing advice.

Featured photo by PiggyBank on Unsplash

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