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Some of the hardest hit stocks belong to companies – Facebook, Apple, Amazon, Netflix and Google. They have collectively attracted trillions to their products, carving out lucrative markets they each dominate in an increasingly digital world. Investors latched on to their success and gave them their own acronym, "FAANG." (It's still in use though, but it's still in the parent's alphabet.)
What a difference a month makes. Since the end of September, individual stocks have plunged between 4 percent and 20 percent, collectively spending close to $ 400 billion in paper shareholder wealth.
The downturn may seem puzzling, given that Apple's iPhone sales are booming, the online shopping traffic continues to keep pace with consumers. destination.
These topics are facing rising challenges. President Donald Trump has escalated a trade war with China, for instance, and governments are starting to consider that regulation could influence its influence. Employees at some broad tech are concerned about their contributions to military and immigration-related projects.
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Much of that has grown to be of concern as the tech companies will not be growing as soon as expected. "We are starting to 'fork-in-the-road' situation for technology," said Wedbush Securities analysts Daniel Ives.
Investors currently are betting it will be a bumpy road. The tech-driven Nasdaq index is 12 percent below the high level reached in August.
The big-name tech stocks have been faring so much so that they have been betting on even bigger things to come from the companies. These wagers may take a long time to pay off, or worse, fizzle completely if a slowing economy or a recession undermines their future growth.
Facebook and Google, for instance, could not be more easily connected to their digital services, and the advertising of their products.
For Amazon, it might be a good idea to check out their e-commerce site or they really do not need an internet-connected speaker like the Echo after all. Netflix might have more difficulty attracting subscribers, and could even start seeing more squeezed.
Rising interest rates are also weighing on stock prices, analysts say. Higher rates reduce the value of future corporate earnings, which in turn undermines the justification for the lofty valuations – and high share prices – of tech companies.
These valuations are measured by price-to-earnings ratios – the amount of interest in the future. Consider Netflix, a company that sold DVDs through the mail during the late 1990s, and which is considered to be worth more than Walt Disney Co. and its Magic Kingdom.
Even after the recent sell-off, Netflix's price-to-earnings ratio stands at $ 107 for every $ 1 in earnings. By comparison, Disney's is a more $ 14 for every $ 1 in earnings – and it's also worth $ 37 billion more than Netflix.
The long tech rally boosted two members of the FAANG club – Apple and Amazon – to trillion-dollar market valuations, making them the first U.S. companies to reach that milestone.
Amazon's market value now stands at $ 800 billion. Apple could also be knocked out of the $ 1 trillion club if its earnings for the last quarter of the year. Amazon and Alphabet reports did this past week.
"There are a lot of white knuckles out there right now," said Ives said.
Nov. 1. Analysts expect Apple to have earned $ 13.5 billion for the July-September quarter, or about $ 6 million every hour.
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