Will the US Tech Group Survive as FAANG Enters Bear Market?

It was the high time of the FAANG – Facebook, Amazon, Apple, Netflix and Alphabet (Google) – group, the most favorite investments for the past decade, 52 weeks ago, but now the group keeps stabbing investors in the gut as the five leaders in the tech group have lost $1.02 trillion in market value from recent highs.

 

Facebook lost $253 billion of its market capitalization since its 52-week high, while Amazon lost $280 billion, $253 billion for Apple, $67 billion for Netflix, and $164 billion for Alphabet.

From its 52-week highs, Facebook plunged 40.6%, 28.9% for Amazon, 24% for Apple, 39.1% for Netflix, and 22% for Alphabet.

 

“The rising volatility, the widening price swings reflect investors’ nervousness with respect to the story for tech, which appears to be changing,” said Alex Bellefleur, chief economist and strategist at Mackenzie Financial Corp. “There are the macro headwinds. Not only is the earnings growth priced to be lower from where it is, you’re also discounting the earnings at a higher interest rate. That adds to the anxiety.”

Tech stocks have been some of the biggest-selloff victims, driven lower by fears over rising interest rates, slowing growth and a handful of high-profile profit disappointments.

However, some of it is part of market correction and retreat from risk triggered by rising interest rates, higher return from bond yields and the volatility in US-China trade war.

 

The year has not been very friendly to Facebook, which has faced a series of scandals involving misinformation on its platform, questions over data privacy and the case of the Russian meddling with the US 2016 election.

Google employees staged a walkout of offices around the world earlier this month after the NY Times reported that Google had paid a multi-million exit package to a former executive who was accused of sexual misconduct.

Meanwhile, Amazon has been facing criticism over its new plan to establish two new headquarters that would use about $2.5 billion on each of the building.

Apple fell as investors fretted that one of the most important product lines in the technology sector was seeing weak demand, while the company reportedly will not display the total number of iPhone sales in the next financial statement, which is 4Q18. The phone company who did such thing was Motorola.

Lastly, Netflix was struggling with the lower than expected subscribers that spook investors after the 2Q18 performance report, while Amazon and HBO are trying to compete with Netflix in online streaming business.

 

It may or may not come to the point of saturation for the tech section, especially FAANG, but as we see the recent performance in the second and third quarter of each company, there is something that keeps bugging us in the data. Facebook may not end up as bad as Hi5 or Myspace, but the fact that it has slow growth is frightening, and that goes to every company in FAANG.

The ups and downs in the US tech section may not have any direct impact on Thai stock markets, but the effect from the plummet of its big cap will surely send negative sentiment to the global market, especially Asia markets that usually follow Wall Street’s footsteps.