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Here’s How The Tech Industry Lost $7.4 Trillion In One Year

MonicaDecember 5, 2022

When you reflect and look at how much changes in a year, it’s quite shocking. People get married, have kids, get divorced, get new jobs, and start businesses. This growth isn’t only personal, but also economic and social. You may have grown a lot over a year, but that doesn’t mean it’s always in the right direction. Unfortunately, however, this past year, several tech companies lost a staggering amount of money.

Out of the 15 most valuable tech companies in America, not one of them generated positive returns from 2021 to 2022. It was a high-strange year, to say the least. We took a look at how the tech industry lost $7.4 trillion this year. We’re going to dump the true, harsh facts onto you, so find out why 2022 has been such a brutal year for tech companies here.

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The Big Names Are Struggling Mightily

Believe it or not, Meta plunged 66% this year and Apple stock is down 16%. It’s been a brutally tough year for these major tech companies, and by looking at the stats, we can see why. This downfall also includes major companies like Tesla, Microsoft, and Netflix, which fell as much as 45% in 2022.

Not only that, but the world’s 400 wealthiest people are poorer this year than they were last year. These tech billionaires were soaring on top of the world only a year ago, but after the plummet, they collectively lost $500 billion. One year can make a huge difference, and with these stats, we can see how. It was a brutal year for a lot of people and that includes crypto with the crypto dream turning into a nightmare.

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It Started With The Pandemic

At the beginning of the pandemic, tech companies saw a sharp decline but were able to quickly make up for it. It’s unlikely they’ll bounce back as quickly as they did at the beginning of the pandemic. It also depends largely on the economy and how it performs as a whole. Because of the tightening of the Federal Reserve, major companies around the world lost trillions in the capitalization of the market.

Major layoffs are also on their way, solely due to “high inflation and fears of a looming recession have cut into consumer and advertiser spending, disrupting the core businesses of many of the biggest names in tech, after years of rapid growth” (via CNN). We already thought the pandemic was bad enough, but it turns out there was much more of an after-effect than we previously thought.

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Why It’s Plummeting

There are several reasons why the tech industry is losing billions of dollars. This includes “the wind out of the markets, including the highest inflation in 40 years, rising interest rates, and the strong U.S. dollar—which hurts multinational companies since they earn less when converting their foreign sales into dollars” (via Time).

Interest rates skyrocketed, which caused investors to rethink their low-interest-rate stocks. Could their rates survive the high-interest rates, or is it doomed to crumble and burn?

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We Spent As Much As Three WWII

According to various users on Reddit, the USA spent a staggering amount of money this year. To put it into perspective, they said the USA spent “$5.3 trillion for lockdown relief, $4.5 trillion in quantitative easing, and $3 trillion in infrastructure. In total ~13 trillion dollars. During WWII, with all the war and propping up the Allies’ economies, the US spent a total of ~4.7 trillion dollars accounting for inflation.

In two years, we spent nearly as much as 3 WWIIs (via Reddit). Not only that, but as the Federal Reserve and other banks increase their rates, U.S. Treasuries are close to their worst returns for two centuries (via Reuters).

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Pump and Dump Companies

This Reddit user went all in and tells the internet there was a lot of delusion surrounding the companies and jobs from this past year. They said, “most of the “hot” companies that drove the last tech bubble were effectively sophisticated pump and dumps.

A handful of VC firms and angel investors were driving hype until acquisition or IPO, and then selling to institutions and the public, who were seemingly unable to see that some of these startups required a ridiculous scale and complete market dominance to be viable if they were even viable business models at all.” From this user’s post, it sounds like everything turned out to be a scam (via Reddit).

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Tech Industries Struggle To Grow

Tech industries are finding it difficult to expand their business and grow, as they initially thought possible. This is because of the slowdown of digital advertising. Apparently, “all of these companies are to some extent dependent on advertising revenue,” says Emily Bowersock Hill, chief executive of Bowersock Capital Partners, a financial management firm.”

Revenues are declining. This is simply a sign of weakness for all tech industries across America, another reason why they lost billions of dollars (via Time).

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Major Tech Companies Crashed

Many tech companies across America lost billions of dollars. According to CNBC, “Microsoft has shed roughly $700 billion in market cap. Meta’s market cap has contracted by over 70% from its highs, wiping out over $600 billion in value this year.

In total, investors have lost roughly $7.4 trillion, based on the 12-month drop in the Nasdaq” (via CNBC). Because of soaring inflation, a lot of these companies that promised future profit were unable to keep their promises. This added to the overall loss of billions of dollars in the tech industry.

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Meta’s Downfall

Meta was worth $1 trillion one year ago. The tech industry lost a staggering amount of money and “the company has lost nearly three-quarters of its stock market value. Meta’s problems are idiosyncratic.

Yet they are also a cautionary tale, one with application to investing in just about all tech companies in an era of raging inflation, rising interest rates and plunging asset prices” (via NY Times). For these major companies, losing this amount of money is astonishing. We can only sit back and hope the market turns around sometime soon.

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Technological Middlemen

It sounds like the tech industry lost a lot of money because of unrealistic expectations, and workers who didn’t add any value to the economy. Instead of having highly experienced companies with a lot of backing, the industry had industries with zero added value. These people were, “technological middlemen posing as “disruptors” or “market makers,” often in industries that didn’t have the margins to support more hands in the cookie jar.

Corporate America may have money to burn, but there are only so many big data firms and gig economy apps that can be realistically supported.” It doesn’t look like the USA will have quality business again anytime soon (via Reddit).

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Poor Buying Habits

The users of Reddit have been watching from the sidelines, and they have a lot to say about the matter. According to one Reddit user, “watching the blue chip-ish tech companies act astonished that consumer buying habits aren’t gonna sustain once-in-50-years velocity from a once-in-100-years pandemic…they’re all resetting to pre-pandemic levels, but acting like the QoQ/YoY revenue declines are an unforeseen crisis. It’s lying, pathetic, or stupid” (via Reddit).

A lot of this is certainly stupid, and there’s not much we can do about it. It’s horrible to watch such a decline in revenue and the economy. It’s affecting us and the tech industry and is a nail-biting situation.

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The Statistics

Let’s take a look at the statistics between Microsoft, Alphabet, and Meta. According to Time, “Microsoft, which is down 1.59% at closing on Monday, reported its weakest quarterly revenue growth in five years, throttled by rising energy costs and a slump in sales of Windows software to personal computer makers.”

That’s not the only tech company that’s suffering from a major downfall and facing struggles they’ve never had before.

Investopedia

Alphabet’s Profits Plummet

Alphabet, another major tech industry, “profit dropped 27% over the previous year as advertisers spent less on marketing for insurance, loans, and mortgages,” basically because of a pullback in ad spending. “The company’s revenue of $57.27 billion was also slightly lower than Wall Street expected.” Even Wall Street has been unable to accurately predict the numbers for these businesses.

Finally, “Meta’s stock dropped to its lowest level since 2016 on Thursday, down more than 20%, after it reported a second quarterly drop in revenue and rising costs at its money-losing Metaverse division. Meta’s stock fell another 6.09% by closing on Monday.” All of these dropping percentages are bad news, time and time again, for the tech industry (via Time).

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Goodbye, Stock Market

The stock market crashed. “Employees who joined those hyped pre-IPO companies and took much of their compensation in the form of stock options are now deep underwater and can only hope for a future rebound” (via CNBC).

We can only hope for a future rebound too because it looks like they dug themselves into a deep hole. By putting a lot of their compensation into stocks, they were already risking losing it all or gaining tons of profit. It goes one of two ways, and it looks like it went the opposite way for many companies.

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Probably Just FOMO

Everyone gets FOMO and investors aren’t immune to it. They probably get FOMO more than any of u, since there’s a lot at stake. This Reddit user pointed out that “for essentially a decade if you didn’t have significant exposure to frothy, speculative tech, chances are you vastly underperformed the market. That, combined with your point on the delusion surrounding much of tech growth companies, led to investors putting massive pressure on fund managers and allocators to maintain large exposure to tech. But the music’s stopped and a lot of folks don’t have chairs, so the fat is getting, rightfully, trimmed from the industry. It’s a painful but necessary cull.”

A cull is happening, workers are getting laid off, and there seems to be a major cleaning up of the tech industry. There’s a lot of speculation that other job cuts are on their way, and it’s only a matter of time before many people are laid off. Something like this was bound to happen, and it may be more necessary than we think (via Reddit).

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Strategy Shifts

With all these major companies plummeting, they’ve switched up their strategies. They need to try and backtrack and make up for lost profit. “Meta, for example, is going all in on augmented and virtual reality while Netflix is now embracing advertising after years of vowing it would not have ads on its platforms,” reports CNN.

That, paired with the major layoffs these companies are seeing, built a recipe for disaster.

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Not A Sustainable Foundation

The people of Reddit have various opinions. They brought up the point of looking at all of this from a sociological and economic perspective. They pointed out that “the tech industry built itself up on exploitation (like all these industries). Greedy VCs and tech bros have completely wrung it dry. The moment everyone else catches on and starts competing for funding and tech jobs the market crashes conveniently.”

This is exactly what happened to the tech industry, and how it was unsustainably built on fragile ground. Basically, “it was built to crash once these people have gained what they think is enough until they move to the next thing.” This hit the nail on the head and couldn’t be more accurate (via Reddit).

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Elon Musk

The drama between Elon Musk, Twitter, and the rest of the world captivated the internet’s attention. Just before the case was going to land in court, Musk bought Twitter. Then, he proceeded to fire over half of Twitter’s workforce. Apparently, “corporate governance is back on the docket after this month’s sudden collapse of cryptocurrency exchange FTX, which managed to grow to a $32 billion valuation with no board of directors or finance chief.

Top-shelf firms such as Sequoia, BlackRock, and Tiger Global saw their investments wiped out overnight.” Musk, just like many other tech industries and big businesses, are a part of the problem (via CNBC).

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Apple Is A Problem Too

Targeting users with ads was one of the biggest profit makers out there. But that all changed because of the privacy policy with iOS and Apple. Facebook and others are unable to target people with ads as easily as they used to. It’s said that “with its stock down by two-thirds and the company on the verge of a third straight quarter of declining revenue, Meta said earlier this month it’s laying off 13% of its workforce, or 11,000 employees, its first large-scale reduction ever.”

That’s a lot of employees to lay off from a major company like Meta or Facebook. This is just another ripple effect of the tech industry losing billions of dollars this past year (via CNBC).

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The Stats Tell All

Let’s look at the stats again. “Rivian has fallen more than 80% from its peak after reaching a stratospheric market cap of over $150 billion. The Renaissance IPO ETF, a basket of newly listed U.S. companies, is down 57% over the past year” (via CNBC).

Not only that but, tech executives are admitting their faults and that they were wrong. When big businesses admit failure, you know it’s true. Oftentimes, they like to mask their failures and give hope to the public. In this case, the complete opposite happened. It’s all true.

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Tech Billionaires

We have to take a look at the billionaires themselves. They also lost a staggering amount of money this year. Their losses, in turn, caused a horrible ripple effect that aided in the tech industry’s loss of billions of dollars.

These people’s net worth was more than we could ever imagine having. It’s quite shocking that these people even lost this much money.

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Sergey Brin

With a net worth of $89 billion, Brin lost $29.5 billion from Alphabet shares. Apparently, “the press feasted on reports that Brin filed to divorce his second wife in January after rumors of a brief affair with Elon Musk. She denied the allegations, as did the Tesla cofounder, who shared selfies of him and his friend Brin, who kept quiet.”

We’re seeing Elon Musk’s name pop up again, which makes us wonder how much he contributed to the overall loss of billions of dollars. It looked like he ruined this family’s life through a suspected affair (via Forbes).

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Jack Dorsey

Dorsey has a net worth of $4.5 billion and a net worth loss of $10.4 billion. This is because of both Twitter and Block. According to Forbes. “Dorsey owns stock in social media giant Twitter, which he co-founded, but owes most of his wealth to Block, the parent of payments processor Square. Shares of both are down, by 40% and 76%, respectively.”

Those are major percentages to be down, and we can only imagine how much it’s affected him and everyone around him. Maybe it’s best just not to be a billionaire in the first place (via Forbes).

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Larry Ellison

Could you imagine having a net worth of $101 billion? That’s Larry Ellison for you, but he recently lost $16.3 billion. “Shares of his database giant, Oracle, are down 17% since the 2021 list, as it struggled with the rest of the market. The company reportedly began laying off hundreds of employees, mostly in advertising, last month in a bid to focus on healthcare IT and its cloud business.”

It sounds like a horrible situation to be in. The tech industry wasn’t the only thing that lost billions of dollars (via Forbes).

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Jeff Bezos

Bezos had an extremely high net worth of $151 billion but ended up losing $50 billion. He previously held the title of the richest person in America. But as we can see, not only did the tech industry lose a staggering amount of money this past year, but people did, too. According to Forbes, “Bezos lost the title of the richest person in America over the past year, prompting predictable jeers from Elon Musk, who surpassed the Amazon founder.

“I’m sending a giant statue of the digit ‘2’ to Jeffrey B.,” Musk wrote in a short email to Forbes in September 2021, when he took Bezos’ spot, “along with a silver medal.” Nearly a year later, Musk still has the gold—by a margin of $100 billion.” Again, Musk is sneaking his way into being one of the richest people in America. There’s certainly more to this than we know (via Forbes).

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Mackenzie Scott

With a worth of $37.7 billion, Mackenzie Scott lost $20.8 billion. Her source of wealth was Amazon, but now, her Amazon shares are worth a lot less. On the bright side, “her charitable giving is costing her big. Since June last year, the ex-wife of Bezos has donated more than $4 billion to causes including Planned Parenthood and the Boys & Girls Clubs of America” (via Forbes). At least she’s one of the few billionaires doing something good for the world. She’s helping benefit those less fortunate than them. Not many people can say they’ve done that, and it’s admirable that this woman is still donating her money, despite her astronomical monetary loss.

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Pierre Omidyar

With nearly $10 billion of net worth, Omidyar lost $15.4 billion of it. This happened after eBay and PayPal took a nose dive. Apparently, “the eBay founder’s net worth dived shares of PayPal, which was acquired by eBay and spun off in 2015, sank 69% in the last year.

Forbes estimates that Omidyar, who is also one of the 25 most philanthropic billionaires, owns roughly 5% of the payments giant.” While 5% may not seem like a lot, when we’re talking billions of dollars, that’s an extremely high amount (via Forbes).

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Larry Page

Page lost $30 billion from his previous net worth of $93 billion. The source was also the crash of Alphabet. Forbes reports, “Page and Sergey Brin, the elusive cofounders of the world’s most popular internet search engine, gave up operational control of Google and its parent, Alphabet, at the end of 2019.

Shares are down 25% since last year’s list, helping cost Page-who gained residency in New Zealand-$30 billion in net worth.” With the toppling of the tech industry of Alphabet, many people suffered the inevitable downfall (via Forbes).

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Slowest Growth Ever

Across major tech companies like Google had the slowest growth ever this year. Because of this, it aided in the loss of billions of dollars in the tech industry. The “Google CEO Sundar Pichai, whose company just recorded its slowest growth rate for any quarter since 2013, other than one period during the pandemic,” said they might need to complete more layoffs, and that more growth could happen with fewer employees.

Many Google employees are worried about getting fired. The tech industry is tense. These masterminds may need to find another job elsewhere (via CNBC).

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More Company Layoffs

Google isn’t the only tech industry completing layoffs they’re happening across many other tech industries in the USA. It’s said that “layoffs at Cisco, Meta, Amazon, and Twitter have totaled nearly 29,000 workers, according to data collected by the website Layoffs.fyi.

Across the tech industry, the cuts add up to over 130,000 workers. HP announced this week it’s eliminating 4,000 to 6,000 jobs over the next three years” (via CNBC).

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Inflation Is A Problem

Inflation is on its way, which translates to higher interest rates. This will cause a ripple effect in households across the USA. They’ll struggle to make payments when high rates are already wringing them dry. The biggest names in tech have failed, which makes it look like it’s bad news for pretty much everyone.

Maybe it’s time to build that cabin in the woods and cut ourselves off from the rest of the world.

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People Looking Elsewhere For Jobs

Unfortunately, that’s a ridiculous number of workers to lay off, and the numbers may keep on climbing. Many of these professionals are forced to look elsewhere for jobs and keep their options open for other ways to make money. Also, “Petra Moser, a professor of economics at New York University, said the loss in market value will likely be felt through employment.

Several tech companies – including Snap Inc., Meta, and Robinhood – have announced or are expected to announce layoffs” (via USA Today). This will also slow down innovation collectively, leading to an overall slowing down of growth. The future looks unsteady.

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A Recession Is On Its Way

Everyone beware, we may be headed toward a recession. It’s best to prepare yourself as much as possible. The warning signs are pointing us in this direction. Based on the looks of the entire economy, it’s not looking good. According to Time, “it looks like we are going to hit a recession.” It’s coming, slowly but surely.

“Tech companies have to get prepared for it,” says Dr. Soudip Roy Chowdhury, CEO of Eugenie.ai, a sustainability tech company. “Some of the biggest tech companies are already slowing down hiring, some will have layoffs” (via Time). We’ve seen that major tech companies are already laying off their employees. It’s only a matter of time before it’s happening to most tech industries.

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Good News For Us?

Many of you may be wondering how to move forward. With everything crashing, is it a good idea to buy in now? Expert Jeff Sommer from the NY Times gives us some insight. He said, “if you have an appetite for risk and high regard for these companies, it may be tempting to plunge into these stocks now, simply because they’ve come down so far.

That may be a good idea, if you have a strong long-term conviction and have just been waiting for a better price If I were buying specific stocks, I would take a value approach, buying solid businesses that generate ample cash flow” (via NY Times). This sounds like solid advice and something to keep in mind before making any major leaps toward purchasing stocks.

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Is Crypto All That?

We all know about crypto, and you’ve likely invested in a coin or two. But it might not be all the hype it’s made out to be. If you’re a tech investor, you need to look elsewhere and in other, more tedious parts of the sector. Crypto is “more about hype than substance.

Cruz said that winners in tech are not going to be those with the next great idea or app. It’s about providing a service that businesses will need even if the economy slides into a recession” (via CNN). We need to start looking at solid, long-term solutions to the inevitable recession that many professionals predict is around the corner. It’s time to buckle up.

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The Future

There’s hope for the future, and we might even see a major shift coming our way. We need to be patient. The key is to look ahead and stay focused. The future may seem bleak, but that doesn’t mean it is. “Micron and Taiwan Semiconductor Manufacturing Company have already announced expansions in the U.S. Additionally, Golden anticipates growth in health care, clean water and energy, and broadband in 2023.

“All of us are a little optimistic about that,” Golden said, “despite the macro headwinds”(via CNBC). They always say, what doesn’t kill you makes you stronger. So maybe we need to get over this hurdle as a society and good things are on their way.

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Short and Long Term

Reddit users also agree. Consumer change drove the increases in tech revenue. “This was due to the pandemic and spending a lot more time online.

Now that people are returning to pre-pandemic habits, that money well is drying up and valuations are dropping back down. It remains to be seen where the bottom is and how messy the correction will be, but tech is still up 10-15% compared to pre-pandemic levels, so why this may look bad over the short term, long term this is more of a natural correction to big and predictable fluctuations in consumer habits” (via Reddit). There may just be light at the end of the tunnel so all we can do is keep moving forward.

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