Inflation and looming recession wipe out $3.2 trillion worth of tech giants

  • The biggest tech stocks are down about $3.2 trillion this year.
  • The market cap of “GAMMA” stocks has fallen by more than $300 billion over the past week.
  • The impact of inflation and signs of a possible recession have weighed on corporate profits and prospects.

The value of some of America’s biggest tech companies has fallen by more than $3.2 trillion this year after investors once again punished disappointing results and forecasts.

“GAMMA” stocks — Google, Apple, Microsoft, Meta, and Apple — saw their market caps collectively drop by more than $300 billion this week as quarterly results showed a mixed fortune.

Amazon’s value fell $170 billion this week after a sharp downgrade of its holiday sales outlook, in a clear sign that consumers are starting to tighten their belts.

Google’s parent Alphabet, meanwhile, is worth $80 billion less than Monday when it surprised investors with a slowdown in digital advertising – another reminder that a recession is on the horizon.

Microsoft, meanwhile, posted its slowest revenue growth in five years on declining computer sales.

Big tech stocks struggled earlier in the year as rising inflation hurt investor confidence in their ability to pass rising costs on to customers.

Signs are now pointing to a recession that Bloomberg economists believe will happen next year. These fears have replaced rising prices as the main gauge of gloomy sentiment.

The hawkish response from the Federal Reserve, which raised interest rates by a further 0.75% last month to fight inflation, is weighing on confidence.

Apple managed to buck the trend, adding $178 billion to its market value on Friday after better-than-expected fourth-quarter earnings. Shares rose 7.5% to close near $156, valuing the iPhone maker at $2.5 trillion, but the stock is still down nearly 15% this year.

Apple’s performance contrasts with Amazon’s 14% tumble this week, Meta’s 22% collapse, Alphabet’s 5.4% plunge and Microsoft’s 3.3% plunge, which account for the decline since the beginning of the year to almost 30%.

Still, analysts say the tech giants remain good investments.

“Longer term, Amazon should benefit from steady margin expansion driven by the continued growth of its cloud and ad businesses,” Wedbush analyst Michael Pachter wrote in a research note. The stock is down almost 40% this year.

Meta may face an uphill battle as CEO Mark Zuckerberg battles the Facebook owner’s plummeting fortunes. The company shed another $80 billion in value to $266 billion this week after posting its first quarterly revenue decline. Meta stock is down 70% since the beginning of this year.

As of Thursday, Zuckerberg’s net worth had slumped by $81 billion since Facebook rebranded as Meta, with the company continuing to pour money into loss-making Reality Labs while its profitable social media arms lose users.

“The Facebook owner is grappling with a decline in business confidence, reflected in lower ad revenue and TikTok’s Pied Piper tunes luring away millions of dollars in potential younger customers,” wrote Hargreaves Lansdown’s Susannah Streeter.

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