Rising Stock Prices Point to Better Days for Big Tech after Massive Lay-offs
If you felt 2022 was a bit of a rollercoaster when it came to high-tech stocks, you wouldn’t be alone. All the big names from Microsoft to Meta were experiencing up and downs in the market. And then the layoffs began at the end of 2022 and into 2023. But now an article by Alex Kantrowitz we found on bigtechnology.com says the big companies are going to rebound in a big way.
Big Tech’s share prices are still well below their all-time highs — and the rebound will be slow — but they’re poised for a comeback now that certainty is returning to the economy. As inflation soared and the Fed raised interest rates rapidly, investors stayed away from the tech giants. Each rate hike made their undisciplined pandemic-driven spending look worse. And Wall Street couldn’t properly value them without knowing when the pain would end.
Already this year, Meta stock is up 51%, Amazon is up 31%, Alphabet is up 20%, Apple is up 20%, and Microsoft is up 10%. All are healthily beating the S&P 500, even with some muted earnings reports this week.
As tech analyst Dan Ives put it in a DM Thursday, “Huge rebound underway.”
The Fed Effect
For much of 2022, the country sat back and watched as Chairman Powell at the Federal Reserve raised the cost of borrowing money. The American economy was very confused after the effects of the pandemic and it was really up to the executives of these powerhouse companies to come up with new ways of running their operations. Which they seem to have done. Job growth continues at an elevated rate in spite of the many layoffs.
The tech giants are well-positioned for a rough economy. They’ve made cuts, including sizable layoffs, well before other industries. And people’s expectations of them have dropped so far that they should be able to deliver. These companies are learning how to telegraph their preparedness to Wall Street, and it’s working.
On Meta’s earnings call Wednesday, Mark Zuckerberg emphasized that 2023 would be its “Year of Efficiency,” a message investors loved. Also, Amazon is working to slow growth this year without giving up its gains.
The economy may still fall into a recession, especially as the Fed continues to (slowly) raise interest rates while growth contracts. And Apple’s earnings report Thursday—a miss on everything but iPad—didn’t exactly instill confidence that consumer spending will roar back. But as runaway inflation fears subside, the type of predictably you need to buy big-ticket items like advertising, cloud hosting, and computing devices is starting to return. Which is good news for the tech giants.
Though it won’t be a straight line upward, it’s fair to say Big Tech has hit bottom and is now ascending.
read more at bigtechnology.com