Although it has just been a year, it seems like it was yesterday.
The Nasdaq Composite has doubled in value since the pandemic’s early days by this point in 2021, when it reached its peak. The mega-IPO by Rivian was the most recent in a record-breaking year for new issues. Tech workers were frolicking in the high value of their stock options, and hiring was soaring.
The scene has changed significantly in a year.
None of the 15 most valuable American tech companies produced profits in 2021. The market value of Microsoft has decreased by about $700 billion. The market capitalization of Meta has decreased by more than 70% from its highs this year, losing more than $600 billion in value.
Based on the Nasdaq’s 12-month decline, investors have collectively lost over $7.4 trillion.
Increased interest rates have restricted access to cheap money, and rising inflation has significantly reduced the value of all those businesses that had been forecasting future profits. Alongside bitcoin, cloud stock prices have plummeted.
There is enough suffering for everyone. Companies in every sector of the market are reducing spending, freezing new recruits, and firing employees. Employees who joined those highly publicized pre-IPO businesses and received the majority of their pay in the form of stock options are currently deeply in debt and can only hope for a future recovery.
After booming years in 2020 and 2021, when businesses overcame the epidemic and profited from an expanding world of remote work and pleasure and an economy brimming with government-backed money, IPOs this year slowed to a trickle. Private market darlings who raised billions in IPOs, filling investment banks’ and venture capitalists’ coffers, had their values reduced. and then further down.
When it all comes together, the Nasdaq is in danger of losing to the S&P 500 for two years in a row for the first time in almost two decades. The tech-heavy Nasdaq was nearing the conclusion of a protracted period of underperformance that started with the implosion of the dot-com bubble when it happened last. The Nasdaq only outperformed the S&P 500 once between 2000 and 2006.
Is modern technology on the verge of that similar reality check? It would be silly to discount Silicon Valley or the numerous attempts at emulating it that have appeared recently all over the world. But are there any reasons to doubt the severity of the sector’s failure?
