Tech giants Apple, Microsoft, and Alphabet had a rough year in 2022. After years of steady growth that had turned each of these companies into trillion-dollar giants, they saw their share prices drop significantly in 2022. Apple’s share price fell by 27%, Microsoft’s by 29%, and Alphabet’s by 39%, compared to a 19% drop for the S&P 500.
But these companies weren’t the only ones struggling. Amazon and Meta saw their valuations cut in half and by almost two thirds, respectively. As a result, Amazon and Meta dropped out of the trillion-dollar club, leaving only Apple, Microsoft, Alphabet, and energy giant Saudi Aramco in the group.
What caused this downturn for these tech giants? A combination of high inflation, elevated interest rates, and macroeconomic uncertainties weighed on the growth prospects of these companies. Many of their lofty valuations are based on the promise of future earnings rather than current performance, and with these uncertain economic conditions, investors are no longer certain that these companies can continue growing at the pace that shareholders have come to expect.
In addition to these broader economic factors, some of these companies are facing specific challenges. Alphabet and Meta are struggling with a slowdown in advertising, and Meta made matters worse with its costly bet on the metaverse. Amazon, meanwhile, is struggling to maintain its pandemic growth while also dealing with rising costs and the possibility of a decrease in consumer spending.
It’s clear that 2022 was a year of reckoning for these tech giants. While they may still be doing well overall, investors are taking a more cautious approach in light of the economic uncertainty and specific challenges facing these companies. It remains to be seen how they will navigate these challenges and continue growing in the future.
