Tech stocks lose $6tn mcap in 2022

Investors will remember 2022 as the year when the narrative around Big Tech finally cracked, ending a yearslong stretch of powerful market leadership. Next year offers few signs of relief.

Marquee stocks like Amazon, Alphabet, Tesla, Nvidia, and Meta Platforms have lost a third of their value or more this year, and the tech-heavy Nasdaq 100 index has fallen 29%, wiping out about $5. 6 trillion of market value.

Surging inflation and interest rates have eroded the favourable conditions that contributed to tech’s years-long advance, raising the prospect of recession in 2023. “For the first time in 5-10 years, Big Tech is seeing a significant degradation in fundamentals,” said Justin Kelly of Winslow Capital Management. “That’s a substantial change in the longterm outlook for these companies, and why they’re no longer the leadership. ”

The economic backdrop at the end of 2022 is harsher than it was a year ago. High inflation has been a driving theme of the year, along with the Federal Reserve’s attempts to combat it through aggressive interest rate increases.

The yield on the 10-year Treasury has more than doubled in 2022, while the US Dollar Index is on track for its biggest one-year jump since 2015. Both are toxic for the fast-growing,highly valued companies that dominate the Nasdaq 100.

While recent reports show price pressures are beginning to cool, US Federal Reserve chair Jerome Powell said on Wednesday the central bank isn’t close to ending its anti-inflation campaign.

Such conditions have made 2022’s tech rout notable not only for its scale, but also its length. The Nasdaq 100 hasn’t closed above its 200-day moving average since April, its longest such stretch in 20 years. This selloff reduced the importance of the so-called FAANG group of companies that had dominated the market. The cohort Facebook owner Meta, Amazon, Apple, Netflix and Google parent Alphabet now accounts for about 13% of the S&P 500weighting, the lowest in more than two years. That’s down from a record 19% in 2020.