US technology industry: is the tech bubble about to burst?

The large US tech companies such as Apple and Microsoft have lost more than a trillion dollars in market value in a very short time. The main trigger is the interest rate hike by the US Federal Reserve. What does that say about the industry?

These days, the bad news is piling up – that causes a lot of nervousness. Despite record sales, Apple’s value has fallen from $3 trillion in January to $2.5 trillion most recently. Microsoft, Amazon, Tesla, and Alphabet have all lost more than 20 percent of their value this year. With the video platform Netflix it is even 70 percent.

The experienced tech investor and manager Tim Armstrong advised on the US stock exchange broadcaster CNBC to keep calm. “Investors are looking at two things right now: focus on results and try to achieve those results without growth at all costs,” explained Armstrong. “Second, investors are now putting their money in exactly those areas that are heeding that. You see that with Uber, for example. People are starting to focus on profits. They want to grow in a healthy way.”

First layoffs at start-ups

Industry leader Facebook, which delivered new record results every year despite violent scandals, has had to accept losses of a good 40 percent so far this year. A few days ago, the company announced that it had ordered a hiring freeze.

Fear of layoffs is spreading, especially among start-ups. The first start-ups such as Cameo, Mural and the financial service provider Robin Hood, which were still enjoying great success during the pandemic, began laying off employees last week.

Nasdaq with big minus

The technology stock market index Nasdaq has shrunk by 28 percent since the beginning of the year. The price of the cryptocurrency Bitcoin has lost more than 20 percent of its value in the past five days alone. Bitcoin is currently at a good half of its all-time high – $ 31,000.

No wonder venture capital firms aren’t the only ones breaking out in a sweat in Silicon Valley. Former Apple employee Tony Fadell knows this feeling. The co-inventor of the iPhone advises start-ups: “Go back to your mission and ignore the market. It has changed dramatically. But it will level off again. Focus on your work. Get your mission done. Don’t pay attention to what’s around It’s happening around you. The most important thing is that you take care of your team.”

Memories of the year 2000

What is happening now is a huge turning point for Silicon Valley, which has resisted all centrifugal forces for more than a decade. Many are reminded of the year 2000, when the market for overvalued tech stocks collapsed overnight.

However, experts believe that – unlike in 2000 – companies today are on much more solid foundations. The success of the business models has prevailed. Even venture capitalists are still willing to invest in start-ups. However, much more attention is currently being paid to how much money a young company spends.

Analyst Laura Matin even advises waiting for the moment to enter the tech stock market. “As prices go down, they can go up again, so I don’t know when this eclipse will end,” she says. “But the day it ends, those stocks will be up the same 20 percent as the 10 to 20 percent they’re down each day. And it’s going to be very difficult to time that bounce.”