The financial markets are plagued by the worst-hit technology and software companies, along with cryptocurrencies. The US Nasdaq technology index, which mainly includes large technology companies, has fallen by 28 percent in the last six months, of which 15 percent has lost in the last month alone.
The most valuable company in the world, the technology giant Apple, paid for the technological aversion. The company’s shares have fallen by 10.5 percent in the last week, and it was replaced in the first place by the Arab energy company Aramco. The Saudi state giant now has a value of $ 2.42 trillion (58.13 trillion crowns).
In addition to the largest technology companies, bitcoin, the world’s largest cryptocurrency, was hit hard. In the last five days, it has lost almost 20 percent and its value has dropped to $ 28,000 per bitcoin (68,000 crowns).
The value is also declining for software companies that prospered during the pandemic. While the vast majority of companies have calculated losses in the past two years, the area of so-called e-commerce has prospered. For example, the shares of the American streaming service Netflix have more than doubled since the beginning of 2020, only to fall below the pre-pandemic level from January this year – to $ 166 per share (4 thousand crowns). This is a 75 percent drop in the last six months.
The problem with software stocks is that many of these companies do not report real profits. Peloton, a company that makes sports equipment connected to the Internet and has been popular with traders at the start of the pandemic, has lost 90 percent of its value since the beginning of last year. Its market value fell from $ 1.13 trillion to $ 96 billion.
Ideal opportunity to buy… or not?
“Such losses are probably the strongest indicator that the pandemic bubble has burst and more customers are moving from digital services and experiences to those in the real world,” Emily Bowersock Hill, chief executive officer of Bowersock Capital Partners, told Times.
In such cases, it might seem like a unique opportunity to buy shares at a fractional price. However, extreme growth in the short term and uncertain earnings of these companies warn. “We’ve seen very little this year compared to last year,” Randy Frederick, vice president of trading and derivatives for Charles Schwab, told Bloomberg. “They’re just down,” he said.
In the previous two years, records were broken not only by software companies, but also by the number of companies listed on the stock exchange. In the so-called IPO (initial public offering) listed 1,035 companies in 2021, according to stockanalysis.com. That’s 120 percent of the more than 480 companies that entered the U.S. market the year before – and even that was a record for the IPO.
At the same time, however, the data show that the vast majority of these companies have lost value since their stock market entry. Only a few tens of thousands have managed to increase their value.
According to Robert Cantwell, portfolio manager of the Compound Kings ETF, the solution to this situation is consolidation, ie merging or taking over one of the largest digital companies. “Takeaway and Doordash are consolidating, Uber is trying, but these companies will not be profitable until the number of players on the field is reduced,” he told Bloomberg. “They’re fighting for the same thing – people. They took people as a commodity, but as it turns out, people are a major input. Now he has to find a way to make his business models profitable. ”
An example of a seemingly dream entry into the stock market, which turned into a nightmare, can be, for example, the electric car manufacturer Rivian. The American carmaker entered the Nasdaq stock exchange last November and its market capitalization at that time climbed to $ 105 billion (2.5 trillion crowns). The company, which had not yet sold a single car at the time of launch, was more valuable than Daimler or General Motors when entering, and could thus boast the status of the world’s fifth most valuable carmaker.
However, when it announced its results for the first quarter of this year, investors were probably not so enthusiastic. The company’s loss reached almost $ 1.6 billion (38.5 billion crowns) and has produced only 5,000 cars since the start of production last year.
The situation on the technology market is thus still uncertain, and with the expected increase in interest rates by the US Federal Reserve, it is uncertain when it will calm down.
“This can be interpreted as meaning that investors are still struggling to properly price the effects of the ongoing sharp reversal in monetary policy on stocks and other risky assets. We will witness similarly violent movements in both directions on the stock exchanges in the foreseeable future, “Tomáš Pfeiler, an analyst at Cyrrus, told SZ last week.