The Big Tech Stumble

Sebastien Callebaut -

Most Large Tech Companies Lost Their Lustre In 2022

Investors flocked to technology companies' shares over the previous ten years, betting on their upward trajectory due to their mouth watering revenue growth and solid long term prospects. Major indices reached scores of new highs as a result of soaring prices for equities including Facebook parent company Meta Platforms, Amazon, Apple, Netflix and Alphabet.

  • Yet, when the Federal Reserve aggressively raised interest rates last year, the music stopped
  • Investors were then compelled to reevaluate the drawbacks of owning stock in companies whose value is based on their potential to produce profits many years in the future

Cloud Supported Growth Slowing Down

One of Big Tech's fastest-growing sectors, cloud computing, has hit a turning point as cost-conscious consumers and mounting economic pressure combine to cool one of the sector's greatest growth markets.

  • According to Barry Briggs, a former Microsoft employee who is currently an analyst at the independent research firm Directions, customers are pressured to reduce their cost base
  • Indeed, many customers are becoming more adept at figuring out ways to reduce the cost of their cloud expenditures as a result of seeing their cloud bills climb as they migrate increasing portions of their computing to platforms owned by businesses like Amazon, Microsoft, and Google

Both Amazon and Microsoft blamed the unexpected slowdown in cloud growth in the most recent quarter on client attempts to "optimise" their cloud spending.

Lay-offs And New Opportunities

The tech industry is turning around after a period of frenetic development and hiring during the worst of the pandemic. A growing number of well-known digital companies, including Meta, Twitter, Alphabet, Amazon, Lyft, Snap, and Stripe, as well as venture-backed startups, are experiencing layoffs, hiring freezes, and recruiting slowdowns.

  • However, a record 6.39 million people were employed overall in tech-related fields in November, up over the previous year, according to government data released last month
  • That was a 12% rise from November 2021 and a small gain over the prior month

Today, the majority of IT jobs today are found in non-tech organizations in sectors like manufacturing, banking, retail, and health care, where digital processes are becoming more and more common. Contrary to their Silicon Valley peers, many mainstream businesses did not go on frantic recruiting binges during the pandemic. However, they keep making investments in tech skills.

Dot-Com Deja Vu?

Some labor market specialists predict a fall in employment in tech positions, particularly if the economy continues to deteriorate. However, history indicates that any dip would pass quickly. Although there have been ups and downs, the number of Americans employed in tech occupations has more than doubled since 2000, when 3.33 million people, according to the Bureau of Labor Statistics, were in such jobs.

  • There were a few months in 2003 following the dot-com bust when the unemployment rate for tech jobs just barely surpassed the national average
  • The percentage of unemployed IT professionals, however, has remained roughly half the national unemployment rate for the most of the last two decades
  • When compared to the national average of 3.7%, the unemployment rate for computer professionals in November was 2%

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Credits

Photo by Rezaul Karim on Unsplash.