{"id":70950,"date":"2022-12-05T13:28:47","date_gmt":"2022-12-05T20:28:47","guid":{"rendered":"https:\/\/moneyppl.com\/?p=70950"},"modified":"2022-12-07T11:24:12","modified_gmt":"2022-12-07T18:24:12","slug":"heres-how-the-tech-industry-lost-7-4-trillion-in-one-year","status":"publish","type":"post","link":"https:\/\/dev.moneyppl.com\/heres-how-the-tech-industry-lost-7-4-trillion-in-one-year\/70950\/","title":{"rendered":"Here’s How The Tech Industry Lost $7.4 Trillion In One Year"},"content":{"rendered":"
When you reflect and look at how much changes in a year, it’s quite shocking. People get married, have kids, get divorced, get new jobs, and start businesses. This growth isn’t only personal, but also economic and social. You may have grown a lot over a year, but that doesn’t mean it’s always in the right direction. <\/span>Unfortunately, however, this past year, several tech companies lost a staggering amount of money<\/a>. <\/span><\/p>\n Out of the 15 most valuable tech companies in America, not one of them generated positive returns<\/a> from 2021 to 2022. It was a high-strange year, to say the least. We took a look at how the tech industry lost $7.4 trillion this year. <\/span>We’re going to dump the true, harsh facts onto you, so find out why 2022 has been such a brutal year for tech companies<\/a> here.<\/span><\/p>\n Believe it or not, Meta plunged 66% this year and Apple stock is down 16%. It’s been a brutally tough year for these major tech companies, and by looking at the stats, we can see why. This downfall also includes major companies<\/a> like Tesla, Microsoft, and Netflix, which fell as much as 45% in 2022.<\/span><\/p>\n Not only that, but the world’s 400 wealthiest people are <\/span>poorer this year<\/span><\/a> than they were last year. These tech billionaires<\/a> were soaring on top of the world only a year ago, but after the plummet, they collectively lost $500 billion. One year can make a huge difference, and with these stats, we can see how. It was a brutal year for a lot of people and that includes crypto with the crypto <\/a><\/span>dream turning into a nightmare<\/span><\/a>.<\/a> <\/span><\/p>\n <\/p>\n At the beginning of the pandemic, tech companies saw a sharp decline but were able to <\/span>quickly make up for it.<\/span><\/a> It’s unlikely they’ll bounce back as quickly as they did at the beginning of the pandemic. It also depends largely on the economy and how it performs as a whole. Because of the tightening of the Federal Reserve, major companies around the world lost trillions in the <\/span>capitalization of the market<\/span><\/a>. <\/span><\/p>\n Major layoffs are also on their way, solely due to “high inflation and fears of a looming recession have cut into consumer and advertiser spending, disrupting the core businesses of many of the biggest names in tech, after years of rapid growth” (via <\/span>CNN<\/a>). We already thought the pandemic was bad enough, but it turns out there was much more of an after-effect than we previously thought. <\/span><\/p>\n <\/p>\n There are several reasons why the tech industry is losing billions of dollars. This includes “the wind out of the markets, including the highest inflation in 40 years, rising interest rates, and the strong U.S. dollar—which hurts multinational companies since they earn less when converting their foreign sales into dollars” (via<\/span> Time<\/span><\/a>). <\/span><\/p>\n Interest rates skyrocketed, which caused investors to rethink their low-interest-rate stocks. Could their rates survive the high-interest rates, or is it doomed to crumble and burn? <\/span><\/p>\n <\/p>\n According to various users on Reddit, the USA spent a staggering amount of money this year. To put it into perspective, they said the USA spent “$5.3 trillion for lockdown relief, $4.5 trillion in quantitative easing, and $3 trillion in infrastructure. In total ~13 trillion dollars. During WWII, with all the war and propping up the Allies’ economies, the US spent a total of ~4.7 trillion dollars accounting for inflation. <\/span><\/p>\n In two years, we spent nearly as much as 3 WWIIs (via<\/span> Reddit<\/span><\/a>). Not only that, but as the Federal Reserve and other banks<\/a> increase their rates, U.S. Treasuries are close to their worst returns for two centuries (via <\/span>Reuters<\/span><\/a>).<\/span> <\/span><\/p>\n This Reddit user went all in and tells the internet<\/a> there was a lot of delusion surrounding the companies and jobs from this past year. They said, “most of the “hot” companies that drove the last tech bubble were effectively sophisticated pump and dumps.<\/span><\/p>\n A handful of VC firms and angel investors were driving hype until acquisition or IPO, and then selling to institutions and the public, who were seemingly unable to see that some of these startups required a ridiculous scale and complete market dominance to be viable if they were even viable business models at all.” From this user’s post, it sounds like everything turned out to be a scam (via<\/span> Reddit<\/span><\/a>). <\/span><\/p>\n Tech industries are finding it difficult to expand their business and grow, as they initially thought possible. This is because of the slowdown of digital advertising. Apparently, “all of these companies are to some extent dependent on advertising revenue,” says Emily Bowersock Hill, chief executive of Bowersock Capital Partners, a financial management firm.” <\/span><\/p>\n Revenues are declining. This is simply a sign of weakness for all tech industries across America, another reason why they lost billions of dollars (via<\/span> Time<\/span><\/a>). <\/span><\/p>\n <\/p>\n Many tech companies across America lost billions of dollars. According to CNBC, “Microsoft has shed roughly $700 billion in market cap. Meta’s market cap has contracted by over 70% from its highs, wiping out over $600 billion in value this year. <\/span><\/p>\n In total, investors have lost roughly $7.4 trillion, based on the 12-month drop in the Nasdaq” (via<\/span> CNBC<\/span><\/a>). Because of soaring inflation, a lot of these companies that promised<\/a> future profit were unable to keep their promises. This added to the overall loss of billions of dollars in the tech industry. <\/span><\/p>\n Meta was worth $1 trillion one year ago. The tech industry lost a staggering amount of money and “the company has lost nearly three-quarters of its stock market value. Meta’s problems are idiosyncratic.<\/span><\/p>\n Yet they are also a cautionary tale, one with application to investing in just about all tech companies in an era of raging inflation, rising interest rates and plunging asset prices” (via<\/span> NY Times<\/span><\/a>). For these major companies, losing this amount of money is astonishing. We can only sit back and hope the market turns around sometime soon. <\/span><\/p>\n <\/p>\n It sounds like the tech industry lost a lot of money because of unrealistic expectations, and workers who didn’t add any value to the economy. Instead of having highly experienced companies with a lot of backing, the industry had industries with zero added value. These people<\/a> were, “technological middlemen posing as “disruptors” or “market makers,” often in industries that didn’t have the margins to support more hands in the cookie jar. <\/span><\/p>\n Corporate America may have money to burn, but there are only so many big data firms and gig economy apps that can be realistically supported.” It doesn’t look like the USA will have quality business again anytime soon (via<\/span> Reddit<\/span><\/a>). <\/span><\/p>\n <\/p>\n The users of Reddit have been watching from the sidelines, and they have a lot to say about the matter. According to one Reddit user, “watching the blue chip-ish tech companies act astonished that consumer buying habits aren’t gonna sustain once-in-50-years velocity from a once-in-100-years pandemic…they’re all resetting to pre-pandemic levels, but acting like the QoQ\/YoY revenue declines are an unforeseen crisis. It’s lying, pathetic, or stupid” (via<\/span> Reddit<\/span><\/a>). <\/span><\/p>\n A lot of this is certainly stupid<\/a>, and there’s not much we can do about it. It’s horrible to watch such a decline in revenue and the economy. It’s affecting us and the tech industry and is a nail-biting situation. <\/span><\/p>\n <\/p>\n Let’s take a look at the statistics between Microsoft, Alphabet, and Meta. According to Time, “Microsoft, which is down 1.59% at closing on Monday, reported its weakest quarterly revenue growth in five years, throttled by rising energy costs<\/a> and a slump in sales of Windows software to personal computer makers.” <\/span><\/p>\n That’s not the only tech company that’s suffering from a major downfall and facing struggles they’ve never had before.<\/span><\/p>\n <\/p>\n Alphabet, another major tech industry, “profit dropped 27% over the previous year as advertisers spent less on marketing for insurance, loans, and mortgages,” basically because of a pullback in ad spending<\/a>. “The company’s<\/a> revenue of $57.27 billion was also slightly lower than Wall Street expected.” Even Wall Street has been unable to accurately predict the numbers for these businesses. <\/span><\/p>\n Finally, “Meta’s stock dropped to its lowest level since 2016 on Thursday, down more than 20%, after it reported a second quarterly drop in revenue and rising costs at its money-losing Metaverse division. Meta’s stock fell another 6.09% by closing on Monday.” All of these dropping percentages are bad news, time and time again, for the tech industry (via<\/span> Time<\/span><\/a>). <\/span><\/p>\n The stock market<\/a> crashed. “Employees who joined those hyped pre-IPO companies and took much of their compensation in the form of stock options are now deep underwater and can only hope for a future rebound” (via<\/span> CNBC<\/span><\/a>). <\/span><\/p>\n We can only hope for a future rebound too because it looks like they dug themselves into a deep hole. By putting a lot of their compensation into stocks, they were already risking losing it all or gaining tons of profit. It goes one of two ways, and it looks like it went the opposite way for many companies. <\/span><\/p>\n Everyone gets FOMO and investors aren’t immune to it. They probably get FOMO more than any of u, since there’s a lot at stake. This Reddit user pointed out that “for essentially a decade if you didn’t have significant exposure to frothy, speculative tech, chances are you vastly underperformed the market. That, combined with your point on the delusion surrounding much of tech growth companies, led to investors putting massive pressure on fund managers and allocators to maintain large exposure to tech. But the music’s stopped and a lot of folks don’t have chairs, so the fat is getting, rightfully, trimmed from the industry. It’s a painful but necessary cull.” <\/span><\/p>\n A cull is happening, workers are getting laid off, and there seems to be a major cleaning up of the tech industry. There’s a lot of speculation that other job cuts are on their way<\/a>, and it’s only a matter of time before many people are laid off. Something like this was bound to happen, and it may be more necessary than we think (via<\/span> Reddit<\/span><\/a>). <\/span><\/p>\n <\/p>\n With all these major companies plummeting, they’ve switched up their strategies. They need to try and backtrack and make up for lost profit. <\/span>“Meta, for example, is going all in on augmented and virtual reality while Netflix is now embracing advertising after years of vowing it would not have ads on its platforms,” reports <\/span>CNN<\/span><\/a>. <\/span><\/p>\n That, paired with the major layoffs these companies are seeing, built a recipe for disaster. <\/span><\/p>\n <\/p>\n The people of Reddit have various opinions. They brought up the point of looking at all of this from a sociological and economic perspective. They pointed out that “the tech industry built itself up on exploitation (like all these industries). Greedy VCs and tech bros have completely wrung it dry. The moment everyone else catches on and starts competing for funding and tech jobs<\/a> the market crashes conveniently.” <\/span><\/p>\n This is exactly what happened to the tech industry, and how it was unsustainably built on fragile ground. Basically, “it was built to crash once these people have gained what they think is enough until they move to the next thing.” This hit the nail on the head and couldn’t be more accurate (via<\/span> Reddit<\/span><\/a>).<\/span><\/p>\n <\/p>\n The drama between Elon Musk<\/a>, Twitter, and the rest of the world captivated the internet’s attention. Just before the case was going to land in court, Musk bought Twitter. Then, he proceeded to fire over half of Twitter’s workforce. Apparently, “corporate governance is back on the docket after this month’s sudden collapse of cryptocurrency exchange FTX, which managed to grow to a $32 billion valuation with no board of directors or finance chief. <\/span><\/p>\n Top-shelf firms such as Sequoia, BlackRock, and Tiger Global saw their investments wiped out overnight.” Musk, just like many other tech industries and big businesses, are a part of the problem (via<\/span> CNBC<\/span><\/a>). <\/span><\/p>\n <\/p>\n Targeting users with ads was one of the biggest profit makers out there. But that all changed because of the privacy policy<\/a> with iOS and Apple. Facebook and others are unable to target people with ads as easily as they used to. <\/span>It’s said that “with its stock down by two-thirds and the company on the verge of a third straight quarter of declining revenue, Meta said earlier this month it’s laying off 13% of its workforce, or 11,000 employees, its first large-scale reduction ever.” <\/span><\/p>\n That’s a lot of employees to lay off from a major company like Meta or Facebook. This is just another ripple effect of the tech industry losing billions of dollars this past year (via<\/span> CNBC<\/span><\/a>). <\/span><\/p>\n Let’s look at the stats again. “Rivian has fallen more than 80% from its peak after reaching a stratospheric market cap of over $150 billion. The Renaissance IPO ETF, a basket of newly listed U.S. companies, is down 57% over the past year” (via<\/span> CNBC<\/span><\/a>). <\/span><\/p>\n Not only that but, tech executives are admitting their faults and that they were wrong. When big businesses admit failure, you know it’s true. Oftentimes, they like to mask their failures and give hope to the public. In this case, the complete opposite happened. It’s all true. <\/span><\/p>\n <\/p>\nThe Big Names Are Struggling Mightily<\/h2>\n
It Started With The Pandemic<\/h2>\n
Why It’s Plummeting <\/span><\/h2>\n
We Spent As Much As Three WWII<\/span> <\/span><\/h2>\n
Pump and Dump Companies<\/span><\/h2>\n
Tech Industries Struggle To Grow<\/span><\/h2>\n
Major Tech Companies Crashed <\/span><\/h2>\n
Meta’s Downfall <\/span><\/h2>\n
Technological Middlemen<\/span><\/h2>\n
Poor Buying Habits<\/span><\/h2>\n
The Statistics<\/span><\/h2>\n
Alphabet’s Profits Plummet<\/span><\/h2>\n
Goodbye, Stock Market<\/span><\/h2>\n
Probably Just FOMO<\/span><\/h2>\n
Strategy Shifts<\/span><\/h2>\n
Not A Sustainable Foundation <\/span><\/h2>\n
Elon Musk<\/span><\/h2>\n
Apple Is A Problem Too <\/span><\/h2>\n
The Stats Tell All<\/span> <\/span><\/h2>\n
Tech Billionaires<\/span><\/h2>\n