The growth of the five largest tech companies (Alphabet, Amazon, Apple, Meta and Microsoft) is expected to slow in the third quarter, but how could this affect cryptocurrencies?
Now that the tech stocks and cryptocurrency markets show considerable correlation, any bad news for big tech could signal problems for cryptocurrencies.
Traditional markets and cryptocurrencies show correlation
In a side-by-side comparison published earlier this month on Twitterone user demonstrated how traditional markets and cryptocurrencies have become increasingly connected.
Since the beginning of 2021, traditional markets and cryptocurrencies have shared trend lines and general peaks.
This led to that user, using the pseudonym “Jumbo” on Twitter, to conclude that Wall Street “deals with Bitcoin and cryptocurrencies simply as an extension of the tech sector. “
If individual investors come to the same conclusion, Correlation means success or failure of technology companies remains of great interest to investors in the cryptocurrency industry.
The “big five” tech companies will update investors this week. Alphabet and Microsoft will be the first to announce Q3 data at close of markets on Tuesday, Half will release its figures at close of business on Wednesday, e Apple and Amazon they will complete the set when they announce their figures as markets close on Thursday.
¿Crypto Snap with Snap?
Last Friday, Hurried (Snapchat’s parent company) announced worse-than-expected results, with revenues up only 6% to $ 1.13 billion, while the net loss increased 400% from $ 72 million to $ 360 million. The figures caused the company’s stock to drop by 20% in the hours following the announcement.
If Snap’s problems have repeated themselves across the tech industry, the results could be disastrous for both technology and cryptocurrencies. However, there is reason to believe that Snap’s problems are specific to the company itself and will not be confused with the tech sector in general.
Snap recently restructured its organization by laying off 6,500 employees at a cost of $ 150 million. This one-time cost has put a heavy burden on the company, suggesting its results may be outliers rather than the norm.. The company’s revenue is also heavily focused on advertising.which is not true for all of its larger couples.
Slower growth forecast for tech companies
Technology and cryptocurrencies have become increasingly linked since 2021, but that may be partly a consequence of broader economic conditions. Recent turbulence in economies nation-states around the world show that few markets are immune to global conditions.
According to a report from Financial Timesthe growth of the top five tech companies to slow to about 10% this quarter, compared to 29% in the same period last year.
If the big five announce figures broadly in line with these expectations, the impact on the market can be minimal. If the results differ significantly from the forecasts, the price action may be more pronounced.
Meta’s metaverse has not borne fruit
Of the big five, Meta is perhaps the one that worries investors the most. Since the rebranding of Facebook, the company has invested heavily in metaverse and Web 3.0 technologies. At the same time, its core business has come under increasing pressure.
Like it Snap, Meta relies heavily on ad revenueand advertising budgets tend to be the first cost savings companies make in difficult economic conditions. The changes in terms Apple has also made ad targeting more difficult for the company.
It is expected that Target announced revenue fell 5% in the third quarter, after a 1% decline in the previous quarter.
Now, at least one major shareholder is asking for the company to change strategy, reducing drastically your expenses in metaverse and staff cut.
Meta is encouraged to save costs
In a paper opened in Meta, the president and CEO of Capital Altimeter, Brad Gerstner, asked the company to reduce personnel costs by 20%. Gerstner also urged Mark Zuckerberg to focus on Artificial Intelligence (AI) on the metaverse and drastically reduce spending on the latter.
According to Gerstner, Meta now has to limit metaverse-related expenses to $ 5 billion per year. Expressing the general concern of traditional investors, Gerstner said that:
“Meta needs to find his mojo” and get “fit and focused”. Gerstner added that “people are confused by the meaning of the metaverse”.
The chief investment officer indicated that the metaverse is a long-term project that it cannot bear fruit for at least 10 years. At current annual spending levels of $ 10 billion or more, those spending levels have scared investors.
“An estimated investment of over $ 100 billion in an unknown future is huge and terrifying, even by Silicon Valley standards,” Gerstner said.
While Gerstner may not fulfill his wish, there are some signs that Meta intends to tighten his belt a little. Last month, Mark Zuckerberg confirmed that Meta will end 2023 as an organization “a little smaller” after a hiring freeze.
That small concession can provide a mild mush for Wall Street sharks chasing more immediate returns.
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