As financial markets vacillate, tech giants wait out the storm.
The stock market and the economy have a symbiotic relationship, with each one impacting the other. During good times, one drives the other in a positive way, and vice versa. One of the most widely followed stock markets is the NASDAQ. The NASDAQ doesn’t just play an important role in the US economy but is a vital sign of the global economy itself.
It’s no secret the worldwide stock markets are seeing high levels of volatility, and the tech-heavy NASDAQ is encountering unprecedented levels of losses as big tech giants struggle. The likes of Apple, Microsoft, Alphabet (Google), Amazon, and Tesla are amongst the largest tech companies by market capital seeing shaky share prices.
Why has tech been hit so hard?
With rising energy prices, an imminent fuel crisis, and the ongoing invasion of Ukraine, investors are lowering their growth expectations. This means they’re looking for short-term wins, instead of long-term projects. Typically, tech companies offer investors long-term buying power, but in such a negative market, with a slowing economy and rising interest rates, it’s a sector that’s suffering.
Most tech companies are unprofitable, with many working on the assumption that they’ll be valuable in x number of years. Of course, this only works when investors have that same belief — and more importantly the cash flow to support that belief.
However, all is not lost. CFD traders in particular are looking to capitalise on the falling share prices of some of these tech companies. Playing with the market volatility may seem risky, but with tech being such an integral part of everyone’s lives, technology share prices won’t suffer too much overall during a global recession.
The future of tech stocks
So, what is the future of tech stocks? Many large tech firms have seen growth slowing for the last few months, with companies like PayPal, Netflix, and Meta in a state of almost freefall. But, if investors have learned one thing in the last thirty to forty years of the dot.com era, it’s that tech is susceptible to the boom-bust repeat cycle.
David Trainer, CEO of Nashville-based investment research firm, New Constructs, told Fortune:
‘While there are plenty of reasonably valued and profitable companies in the market, there are many more dangerously overvalued and unprofitable companies whose stocks could fall much further — and some even to zero’.
Tech stocks are particularly prone to the boom-and-bust cycle because of the innovation behind tech that causes these bubbles. But what we do know, is that a boom will always come back — we just don’t know when.
