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Carvana, the online auto dealer with its towering car “vending machines,” has laid off 12 percent of its staff. Doordash’s business is off 49 percent this year.
Affirm, a leader in buy-now-pay-later, has lost three-quarters of its clicks since last year. Business at Shopify, once seen as a fierce Amazon competitor, is down by two-thirds.
The tech sector lived high during the COVID War, with online sales humming, the Fed’s record low interest rates supporting cheap borrowing, and the ever-rising stock market reassuring investors.
Those were the days; these aren’t.
The tech-laden NASDAQ traded above 16,000 last November; at the end of 13 May, it had lost a quarter of its value, well into a bear market.
Alphabet, Amazon, Apple, and Meta together have shrunk in market value by $1.1 trillion, the Financial Times reported, with Apple alone tossing $600 million.
“It’s a full-scale, complete puke of tech, a full-fledged eject button,” Jeffries analyst Brent Thill told the FT.
“Less than a year has gone by and all high-growth software companies are evil, with no profits,” he said. “It’s a wholesale shift into defensive sectors, energy and utilities.”
Tech companies are taking steps many never have—cutting staff, freezing hiring, trimming costs, and hoarding cash.
“I’ve been talking about free cash flow more than I have since I took my first accounting class,” one tech executive told the FT.
“In times of uncertainty, investors look for safety,” Uber CEO Dara Khosrowshahi wrote in a staff memo earlier this month obtained by the FT.
“They recognize that we’re the leader in our categories but they don’t know how much that’s worth,” the memo said. “We need to show them the money.”
Venture capital funding shrank 19 percent in this year’s first quarter, compared to the last three months of 2021, the largest reduction since 2012’s third quarter. Venture capitalists also reduced their exits from their backed companies by 45 percent, a sign of just how far returns have fallen.
The investors would rather hold on in hopes of a brighter future than sell now at a loss.
“People are still writing checks,” Samil Shah, a partner in the Haystack venture capital firm, said in an FT interview, “but you have to fight for it much more than you would have had to a year ago.”
TRENDPOST: Tech stocks’ collapse proves the point we have made in the past: tech shares’ market price was buoyed by a combination of the COVID-era lockdown, the Fed’s cheap money, and stock-market speculation.
Now that those factors have ended, the market is assigning tech stocks their true value.