At the end of October, Tech companies experienced a dark week. All of GAFAM’s valuations fell, with the Financial Times estimating the decline at nearly $800 billion. In the question? A combination of factors related to the economic slowdown and rising costs for many organizations.
Tech world is bad. Within months, many companies laid off all or part of their workforce. Usually, these are startups or unicorns. This is largely due to the fact that these organizations spend a lot of money, are not necessarily profitable, and rely on fundraising to bring in the money needed to keep the accounts afloat. Problem? Investors are more cautious than ever and less prone to putting money on the table. Today, they mainly ensure the profitability of a company before investing.
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Amazon, Google and Microsoft in turmoil?
The first to suffer the horrors of this black week was Amazon. In fact, the e-commerce giant is unlikely to meet the targets thought by analysts who previously estimated that the company would generate $ 155 billion in revenues in the last quarter of 2022. This is the most strategic period for Amazon. , as it includes Black Friday, the second Prime Day (which took place in October), as well as the holiday season.
Now, analysts estimate that Amazon should generate $140 billion instead. This announcement is coupled with the fact that revenues from the cloud (and therefore from the AWS entity) are slipping, with customers having to cut costs significantly as well. It was enough to send the e-commerce giant’s valuation down. Amazon stock lost nearly 9% of its value in a month and fell 14% in just 5 days.
Microsoft and Google are facing the same issues: the increase in the cost of energy has a direct impact on their business because data centers are very energy intensive. In addition, customers are also obliged to save as they also face rising prices of energy and raw materials. So, advertising and cloud services are less profitable.
Between Tuesday and Wednesday, Microsoft stock lost 7.74% of its value. Despite the improvement on Friday, October 28, the stock of the company created by Bill Gates has lost almost 18% of its value in the past 6 months. On Google’s side, it was a 7.5% drop on the NASDAQ on Black Tuesday, October 25. On the other hand, over the long term the fall in valuation is more impressive. Since the start of the calendar year, or January 3 for the New York Stock Exchange, the company has lost 33% of its value.
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Meta stock drops, Mark Zuckerberg’s fortunes suffer
The steepest drop is attributed to Meta. In fact, the group formerly known as Facebook suffered greatly from the strategy of its founder, Mark Zuckerberg, to invest everything in the metaverse. It must be said that 10 months after the launch of Horizon Worlds, the metaverse of Meta, some rooms remain empty. As mentioned by Thomas Pontiroli, journalist at Les Échos, the company is counting on 500,000 monthly users. Today there are about 200,000.
The Verge highlights the sinister figures of Meta’s metaverse, accessible only through the band’s virtual reality headset: Quest. Last quarter, the Reality Labs division lost nearly $3.7 billion. Over the course of the year, the loss for this department was almost 10 billion, while the Quest 2 helmet saw its price increase by $100 at the same time, a very aggressive price that put off many customers.
In total, Meta plans to spend 10 billion dollars per year, for 10 years, on this project that does not attract anyone. However, the group aims to make Horizon Worlds available on PC, Mac, tablets and smartphones by the end of 2022, stating however that the experience will be significantly reduced.
These phenomena are added to several other economic factors that are damaging Meta’s business. While Facebook is losing its audience and no longer attracts TikTok, Instagram is struggling to renew itself. And all this without forgetting various scandals like Cambridge Analytica.
Since Mark Zuckerberg’s fortune is directly related to the good financial health of Meta, it also suffers from the difficulties of its leader’s risky decisions. Since the beginning of the year, Meta stock has lost 70% of its value. The company is now valued at $266 billion. Mark Zuckerberg appeared in the top 10 richest people in the world. Currently at 26e area, his wealth is estimated at 38.2 billion dollars. He lost $87.3 billion in one year.
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Apple, only GAFAM is fighting
Smartphone manufacturers are also going through tough times. In fact, several factors are pushing customers to rethink their phone purchases: greater durability of products on the market, ecological awareness, aggressive price increases… As a result, all the profits of the manufacturers decreased, with the exception of ‘Apple, which sees an increase in its turnover of 2%.
However, not everything is rosy in the land of apples. In fact, iPhone 14 orders are slowing down. The company plans to speed up production to deliver large quantities of smartphones. At the end of September, just a few days after the release of the new model, Apple decided to cancel the order placed with its manufacturers.
On the side of manufacturers, problems also appear: rising energy prices, lack of electronic components… Some devices are becoming complicated to buy, this is particularly the case with the PlayStation 5. Apple is working relatively well despite everything.. On Black Tuesday, the apple brand lost only 1% of its value. Since January, however, Apple shares have fallen 14%.
Expect layoffs at GAFAM?
This is everyone’s question. In fact, Google has paused its recruitment to conduct a headcount. It must be said that large companies grow rapidly, they are welcomed with a vengeance. Now, they realize that some people are not necessarily in the right position or quite simply that some recruitments are not necessary.
In France, many startups are starting to ask about hiring, facing difficulties in raising funds. In the United States, the trend goes beyond layoffs. In total, in Tech, nearly 45,000 people lost their jobs in 2022 alone.
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