Tech Companies Lose Trillions In Valuation This Year

Three trillion dollars in value lost… and counting.

Technology stocks soared to new heights during the pandemic and the ongoing burnout on reentry has been costly.

Even a stronger than expected U.S. gross domestic product (GDP) report today wasn’t enough to soften the landing for tech companies.

Tech companies lose $3 trillion in valuation this year

Meta Platforms, Inc. (META – formerly Facebook) looks to be the new face of dwindling mega-cap tech stocks.

META stock was down more than 24% in trading on Thursday after a dismal third quarter earnings report that revealed a $9 billion loss in its virtual reality division and weak fourth-quarter projections. META closed at $97.94, down 24.56% on the day for the lowest level in six years. META opened the year at $336.53. 

Aggregate losses among former pandemic darling tech stocks has ballooned to more than $3 trillion in the last year among seven companies, including FAANG stocks.

FAANG stocks refer to high valuation technology companies that are significant players in all three major indexes and include META (formerly Facebook, Amazon, Apple, Netflix, and Google (now Alphabet).

The bite of FAANG stocks – leaders in the mega-cap tech block – is more of a bark among all the uncertain noise of this volatile stock market.

Add in weaker price action in Tesla, Inc. (TSLA) and Microsoft Corp. (MSFT) and the current market impact from mega-cap tech leaders is more of a “yip” heading into the fourth quarter.

Still, these tech stocks will play a role in the markets going forward. Within the overall technology sector, MSFT and AAPL account for 40% of valuation.

Economic numbers didn’t spur another market rally

Traders expected a stronger trading session Thursday after GDP numbers were released just as the stock market opened.

GDP numbers turned positive for the first time this year with a 2.6% increase in the third quarter. This included slightly fewer than expected jobless claims at 217,000 compared to the 220,000 forecasted. Claims were still higher than the second quarter which came in at 214,000.

While a slimmer trade deficit and more consumer spending contributed to the GDP boost, other areas held back a higher result. Core durable goods orders were weaker than expected at -.5%, housing numbers faltered, and consumer spending was down from the second quarter.

This core number in durable goods is a focus of the Federal Reserve (Fed) and its plans to raise benchmark interest rates again next week.

The Dow topped all indexes today, spiking by more than 400 points early in the session and holding on for a solid winning day. The Nasdaq – where tech stocks reign – was down once again along with the choppy S&P 500.

In the market today, the Dow closed at 32,033.28 points to gain .61% (adding 194.17 points on the day). The Nasdaq crumbled to 10,792.68 points for a 1.63% tumble while the S&P 500 slipped .61% to 3,807.30 points.

Fed ahead as traders await interest rate hike

This constant up-and-down, chop-and-go stock market is likely to continue as now traders are holding on to see what happens at the next (FOMC) meeting on Tuesday and Wednesday.

Expectations are for another 75 basis point hike in benchmark interest rates from the central bank decision makers.

But was the third quarter 2.6% GDP spike enough to sway the bankers to back off hawkish plans, even though the core GDP numbers were dodgy?

Traders may have to wait it out until the central bank makes the call next week.

“It’s just so tough to get on the right side of this market for more than about 15 minutes,” said Bruce Marshall, Senior Director of Options and Income Trading at Simpler Trading.

Losses in market-leading tech stocks don’t instill confidence in traders.

Traders looking for direction in this market can turn to a long-standing indicator, according to Kody Ashmore, Director of Weekly Options Strategies at Simpler Trading.

“If you want to know where the market is going to go, look at the dollar,” Kody said.

The dollar was at $110.60 at the close on Thursday, up by .83%. A strong dollar is generally not a plus for equities, particularly big-name tech stocks which often have overseas operations with higher costs due to a strong dollar.

An important skill for traders in this market is to contain emotions and focus on technical analysis.

“I want to be patient – just have to see what plays out in this market,” Kody said.