US Stock Exchange Tech companies erase pandemic gains as rates rise

 

The falls in the stock market are being generalized. Rate hikes and recession fears are taking a toll on markets, but it's tech companies that are suffering the most. These firms, which in the toughest moments of the pandemic managed to resist with greater ease, now see how their income and changes in consumption habits are taking their toll on their business model. The Nasdaq has fallen 29.1% so far this year, falls that from the historical maximums registered in November 2021 are extended to 30.9%. These cuts return the index to the levels prior to the outbreak of the pandemic.

Unlike what happened during the dotcom crisis, this time the falls are not due to a bubble bursting. The declines are largely explained by technology firms being the most sensitive to rate hikes. "The Nasdaq is made up of many companies classified as growing, especially from sectors such as technology or biotechnology, firms that benefit from low interest rates," says Juan José Fernández-Figares, director of analysis at Link Securities .

An important part of the valuations of these listed companies are calculated with income forecasts, which lose value in a scenario of rising rates. Added to the loss of revenue value is the fact that with the end of the restrictions and the return to normality, the results of the large US technology companies have lost part of the shine achieved with the Great Confinement.

Amazon, the online distribution giant, is the best example of this trend. The company opened the year with the first losses since 2015, some red numbers that have been expanding as the year has passed, reaching 5,872 million dollars (about 5,941 million euros) in the first six months of 2022. The reason that explains its red numbers is not due solely and exclusively to the return to normality. The rise in prices in an environment of energy crisis has resulted in a substantial increase in costs. The company assures that it is taking measures to solve these problems and improve the productivity of its distribution network. Despite this, so far this year Amazon has left a 27,

Netflix moves along the same line. The streaming platform that capitalized on the stay-at-home trend is now challenged to end subscriber loss for the first time in a decade. Throughout the year the company leaves its platform throne with more users, a position that has become occupied by Disney +. Only in 2022 its titles yield 60% on the Stock Market.

On the other hand, Apple, which in the first six months managed to overcome a record iPhone sale, has been forced a few weeks ago to backtrack on its sales targets for new devices for the year. The shortage of semiconductors and lower demand in a recession scenario put its leadership as the most valuable company in check. Its capitalization is around 2,378 million euros compared to 2,139 million for the oil company Aramco, a firm that is being favored by the rise in the price of crude oil. In the exercise, Apple cuts 17.3%.

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