Big tech stocks’ wild ride: Why are so many stocks taking a dive?

Posted: 3 February 2022 5:51 pm
News

Over the past 24 hours, big tech stocks have taken a hit. The likes of PayPal, Netflix and Facebook parent Meta have seen their share price dive. So what’s caused such a dip?

Big tech started 2022 on an unsure footing. January was not kind to FAANG stocks or other big tech giants like Microsoft.

For a while, it looked like the outlook for tech giants was improving, but Meta Platforms’ (FB) latest quarterly results wiped around $200bn (£147bn) off the company’s stock market value after its shares plummeted by 23%.

So is it purely down to Facebook’s disappointing performance that we’re seeing such a dip in big tech share prices? Or have investors fallen out of love with the fourth industrial revolution?

What’s been happening?

On February 2, 2022, lots of big tech stocks took a dive, causing the Nasdaq Composite to drop 1.6% and the S&P 500 to slide by 1.2%. Let’s take a look at how FAANG stocks and the likes of Tesla and Microsoft fared.

Facebook

Meta Platforms Inc, the parent company of Facebook, saw its share price drop 24.04% on February 3, 2022. In sharp contrast to its all-time high of $382.18 (£280.95) recorded on September 7, 2021, Facebook’s share price dropped to around $245 (£180.11) following disappointing quarterly results and the news that it had seen the number of daily active users drop for the first time in its 18-year history, to 1.929 billion in the 3 months to December, vs 1.93 billion in the previous quarter.

For a 5-year view of the performance of this share, see the graph in our dedicated guide.

Apple

As a FAANG stock, Apple is not immune from what else is happening in big tech. But its latest set of quarterly numbers has meant that its share price has not been as hard hit as some other tech stocks. Its current share price of $175.32 (£128.88) is not too far behind its 52-week high of $182.94 (£134.48).

For a 5-year view of the performance of this share, see the graph in our dedicated guide.

Amazon

Amazon had a stellar 2021, recording an all-time high closing price of $3,731.41 (£2,743.05) on July 8, 2021. However, its share price has since taken a dive, standing at around $2,819.95 (£2,073.02) today as supply chain issues and labour shortages impact its performance.

For a 5-year view of the performance of this share, see the graph in our dedicated guide.

Netflix

Netflix is one stock that’s seen a significant drop from its 52-week high of $700.99 (£515.32), to $416.60 (£306.25) at the time of writing. It wasn’t too long ago – November 17, 2021 in fact – which saw its share price up at $691.69 (£455.55). But concerns over the streaming business model have taken hold and a fall-off in subscriber numbers have made investors nervous.

For a 5-year view of the performance of this share, see the graph in our dedicated guide.

Google

A stock split recently announced by Google (Alphabet) has seen its share price performing well in recent weeks. That combined with its stellar earnings in the fourth quarter means that its share price has remained around $2,930.89 (£2,154.57) – not far off its 52 week high of $3,030.93 (£2,228.11).

For a 5-year view of the performance of this share, see the graph in our dedicated guide.

PayPal

Warnings of weaker growth and a decline in volumes have led PayPal’s share price to plummet. Shares closed 24.6% down at a 21-month low of $132.57 (£97.46) on Wednesday February 2, 2022, a move that wiped around $50bn ($36.7bn) from PayPal’s market capitalisation.

For a 5-year view of the performance of this share, see the graph in our dedicated guide.

Tesla

Tesla’s share price is facing a challenging time. The news it has had to recall some vehicles due to safety concerns, as well as increased competition in the electric vehicle (EV) market, meant that its share price opened down at $882 (£648.38) on Thursday February 3, 2022, in stark contrast to its 52-week high of $1,243.49 (£914.12).

For a 5-year view of the performance of this share, see the graph in our dedicated guide.

Microsoft

Microsoft shares have fared relatively well after it reported better-than-expected earnings and revenue for the fiscal second quarter. However, it’s not immune from the concerns around big tech stocks, and it’s seen its price drop to $309.49 (£227.51) on opening on Thursday February 3, 2022, from a 52-week high of $349.67 (£257.05).

For a 5-year view of the performance of this share, see the graph in our dedicated guide.

Why is big tech taking a hit?

Some have argued that big tech is overcrowded and overvalued. So when disappointing results come through or the US Federal Reserve indicates it may increase interest rates, investors get nervous causing tech stocks to retreat.

The less-than-stellar results reported by Facebook, as well as disappointing results from PayPal and concerns around Netflix’s subscription-based model all play into the worry that big tech has outsized growth prospects. As one of the most overvalued asset classes, big tech is therefore left vulnerable to meaningful downside corrections.

This article offers general information about investing and the stock market, but should not be construed as personal investment advice. It has been provided without consideration of your personal circumstances or objectives. It should not be interpreted as an inducement, invitation or recommendation relating to any of the products listed or referred to. The value of investments can fall as well as rise, and you may get back less than you invested, so your capital is at risk. Past performance is no guarantee of future results. If you're not sure which investments are right for you, please get financial advice. The author holds no positions in any share mentioned.

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