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For years, investors have apparently loved technology values as much as most people love their smartphones.
But Wall Street has suddenly seized Silicon Valley and the rest of the technology, causing a vicious slump in the stomach in October.
Some of the most affected actions belong to five companies: Facebook, Apple, Amazon, Netflix and Google. They have collectively attracted billions of people to their products, creating lucrative markets that they dominate in an increasingly digital world. Investors took advantage of their success and gave them their own acronym, "FAANG". (It's still used, even though Google is currently listed on the stock exchange of its parent Alphabet Inc.)
What a difference a month makes. Since the end of September, FAANG's individual shares have plunged by 4% to 20%, collectively erasing nearly $ 400 billion in paper wealth.
The recession may seem daunting given that Apple's iPhone sales are booming, that online shopping traffic continues to send more and more consumers to Amazon, people are constantly asking Google to enlighten and direct them, continue to post on Facebook and Netflix has never been such popular entertainment. destination.
But these companies are facing increasing challenges. President Donald Trump, for example, has stepped up his trade war with China, and governments are starting to consider tougher regulation that may reduce the influence of technology. Employees of some large technology companies are increasingly reluctant to pay their companies' contributions to military and immigration projects.
This largely contributes to the fear that technology companies will grow as much and as quickly as expected. "We are starting to see a" techie "situation for technology," said Daniel Ives, an analyst at Wedbush Securities.
Investors are currently betting that it will be a bumpy road. The Nasdaq index, based on technology, is 12% lower than the peak reached in August.
Well-known technology stocks have been doing so well for so long that investors are banking on even greater business results. These bets could take longer to pay, or worse, would collapse completely if a downturn in the economy or a recession undermined future growth.
Facebook and Google, for example, may not attract as many new users to their free digital services, and advertising generating the bulk of their revenue may be reduced.
For Amazon, this could mean that consumers reduce their spending on merchandise on its e-commerce site or decide that they really do not need an internet-connected speaker like the Internet. Echo, after all. Netflix may have more difficulty attracting subscribers and may even start seeing more cancellations if households feel stuck.
The rise in interest rates is also weighing on stock prices, analysts said. Higher rates reduce the present value of future corporate earnings, which undermines the rationale for high valuations and high share prices for technology companies.
These valuations are typically measured by price / earnings ratios – the amount that investors are willing to pay for every dollar of earnings anticipated. Let's take Netflix, a company that started renting DVDs in the late 1990s and which, not so long ago, was considered worth more than Walt Disney Co.'s his magic kingdom.
Even after the recent sale, Netflix's price-earnings ratio is $ 107 for every dollar earned. By comparison, Disney costs $ 14 more for every dollar earned. It is also worth $ 37 billion more than Netflix.
This technology rally has allowed two members of the FAANG club – Apple and Amazon – to be valued at billions of dollars from the market, making it the first American companies to reach this milestone.
But the market value of Amazon is now less than 800 billion dollars. Apple could also be eliminated from the $ 1 trillion club if its last-quarter profits disappointed investors in the same way that the Amazon and Alphabet reports had done last week.
"There are a lot of white knuckles out there right now, so all eyes are on Apple so that he becomes the knight in shining armor," Ives said.
Apple's report for its fourth fiscal quarter is expected to be released Nov. 1. Analysts expect Apple to have gained $ 13.5 billion for the July-September quarter, or about $ 6 million per hour.
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Alex Veiga, editor of AP Business magazine in Los Angeles, contributed to this story.
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