Friday, June 9

Between the superbubble and the balloon: why the big technology companies are falling between 10% and 20%

In October 2021 Netflix made an all-time high on the stock market. Its shares were trading at $690. Since then the fall has been spectacular, and at yesterday’s close those same shares had fallen to $387. So far this year, Netflix has lost 35.19% of its value, and it is not the only one. Virtually all of the big tech companies are suffering: Amazon is down 15.18%, Microsoft is down 11.47%, Apple is down 11.20%, and Tesla is down 22.49%. What’s going on? Let’s see.

Inflation. In the United States, inflation is through the roof.It’s not that we’re better off here— and experts point to this as one of the big reasons companies are having a hard time. En The Motley Fool They explained how this factor causes expenses to increase, but if interest rates go up to offset inflation —and that has his that—, that also reduces the growth estimates of the companies.

The technological ones, among those that suffer the most. Inflation does not affect both equally. The energy sector, for example, tend to do well in times of high inflation. Technological companies, on the other hand, have a bad or very bad time: the index FANG+, which brings together the 10 most important technology companies, has fallen by 13.92% so far this year, something extremely rare that can only be compared to what happened with confinement – ​​from which they recovered like a beast. The NASDAQ It has fallen 12.49% in these three weeks and more, but if we include other industries, the indices make it clear that the losses are focused on the tech sector. The S&P it has done less, 8.06%, and the Dow Jones even less, 6.07%. Our IBEX 35 —with little weight of technology companies— 3.59%.

Netflix, plummeting. Probably the most striking case of this fall in the big technology companies is that of Netflix, which, as we said, has fallen dramatically and is at the levels of April 2020. Last Friday, its shares They collapsed 22%, but not only because of inflation, but because the quarterly results showed that the number of subscribers it doesn’t grow so fast anymore. It doesn’t surprise me, especially when the alternatives are getting stronger and when the price of Netflix is ​​already becoming prohibitive. Come on, not all of them fall in the same way, and there are elements that influence and further precipitate that fall in the value of the shares.

Superbubble…?. The buzz of the stock market bubble comes ringing for a long time – with special exuberance of technological values—and there are those who defend that we are not in a bubble, but in a super bubble. Jeremy Grantham, an influential investment fund manager, cree that we are in the middle of one of them and that this will not end well. He got it right in 2000 and 2008, and now he wishes us all good luck because “we’re going to need it.”

…or more than bubble, balloon? Others are less alarmist and claim that this is not a bubble, but rather a balloon. MG Siegler, writer and investor, speaks of “The great deflation” of this hyperinflated balloon that in fact we have been seeing for months. Tech stocks have lost value in recent weeks, but they have done so often without big falls – Netflix would be the exception to the norm – and for him we will continue to see frequent drops of 1, 2 or 3% in share prices. technological. “The markets were overheated, and now they are cooling down. This is rational.”

Image | Cameron Twenty