This year, just five Big Tech stocks lost a total of $3.65 trillion in market value because the Federal Reserve quickly raised interest rates, which hurt the share prices of some of the most well-known companies in the US.
So far in 2022, each of the “Big Five” tech stocks—parent Google’s company Alphabet, Amazon, Meta Platforms, Microsoft, and Apple—have lost $500 billion in market value, according to data from Refinitiv.
As of Wednesday’s close, the benchmark S&P 500 stock market index has dropped nearly 19% and the tech-heavy Nasdaq has dropped just under 32%.
The Fed’s aggressive interest rate hikes have contributed to the overall drop in stocks, but they have hit the tech and other growth companies especially hard.
The US central bank raised its policy rate from almost nothing in March to around 4.5 percent by December. This was done to try to bring down inflation, which has been at its highest level in four decades.
Higher interest rates make people want to save money instead of spending it, and they also make it more expensive to borrow money. Both of these things hurt the share price of a company.
And they tend to make stocks less valuable for fast-growing companies like the Big Five since a higher cost of borrowing reduces their future cash flows, which are the main factor in figuring out how much they are worth.
Meta, which is the parent company of Facebook, and Amazon both took big hits to their market caps after they said their earnings would go down in 2023 because of a recession.
Meta’s stock fell 24% in a single day in October after it missed earnings estimates and warned of a slowdown in digital ad spending, which was a risk that many in the online industry had already mentioned.
Refinitiv says that the market value of the social media giant has dropped $635 billion this year. This is because many analysts don’t like the company’s move to the metaverse. Its market value is now $318 billion, down from $953 billion when 2022 began.
In the same month, Amazon fell 11% after it gave a bad sales forecast for the important holiday season. So far in 2022, the online retail giant has lost $806 billion. This is the first time since April 2020 that its market cap has been less than $1 trillion. It used to be $1.691 trillion, but now it is $885 billion.
Alphabet’s market value went from $1.921 trillion to $1.163 trillion, a $758 billion drop. Microsoft, on the other hand, went down from $2.525 trillion to $1.822 trillion, which is a $703 billion drop.
From the beginning of 2022, when Apple was worth $2.902 trillion, its total value fell by $747 billion. But it is still the biggest company in the world, with a market value of just under $2.155 trillion.
If you added Tesla to the five Big Techs, the total market value loss for the group would be $4.2 trillion.
The share price of the company that makes electric cars has dropped 61% this year. Investors are worried about how Elon Musk’s takeover of Twitter will affect sales, and a slowing economy in China is also hurting sales. This means that the market value of Tesla has dropped by $572 billion.