2022: Big Tech's Year of Reckoning

After years of unrelenting growth that turned each member of the so-called GAMAM (formerly GAFAM) group into trillion-dollar companies, 2022 became a year of reckoning for the tech industry and its shareholders. Having outperformed the market for years, the better part of the past two decades even, tech giants dragged the market down with them last year.

While Apple, Microsoft and Alphabet performed significantly worse than the overall market in 2022, seeing their share price drop 27, 29 and 39 percent, respectively, versus 19 percent for the S&P 500, Amazon and Meta did even worse, as their valuations were cut in half (Amazon) or by almost two thirds (Meta). The latter two even dropped out of the trillion-dollar club, leaving Apple, Microsoft and Alphabet alongside energy giant Saudi Aramco in the illustrious circle.

High inflation, elevated interest rates and macroeconomic uncertainties abound are all weighing on the growth prospects of technology companies whose lofty valuations are often based on the promise of future earnings rather than on current performance. Apple and Microsoft for example, are still doing well, but investors are no longer certain they can keep growing at the pace that shareholders have come to expect. Alphabet and Meta, meanwhile, are caught in a broader advertising slowdown, with the latter making matters worse with its costly bet on the metaverse. Finally, Amazon is struggling to keep up with its pandemic growth, all while trying to manage surging costs and the prospect of a consumer spending slowdown.