I know well that these days there is nothing but talk of Elon Musk and Twitter. Musk fires this, Musk enters the social media office with the sink, Musk wants to readmit Trump: Musk, Musk, Musk.
You're all losing sight of the real Big Tech news: the giant electronics companies that have fueled the tech business for years won't go away, but their superstar days seem to be drawing to a close.
And the Wall Street bosses who brought them to the altar are now giving up. It's a downsizing, period. Maybe not in the goals, but certainly in the "posture": these companies (and even more their employees) must learn to live with less.
Many clues prove it
Every time the Big Tech stocks go down there is someone shouting their death, but at least we have been talking about it here for unsuspecting times. Anyway, you tell me what we should talk about when Alphabet, Meta and Amazon lose 400 billion in value in just one week.
The reasons? On closer inspection, all different. But all these reasons have the same underlying problem: Big Tech are now mature, staid companies. They no longer impress Wall Street, with crazy growth in their core businesses, and none of them seem to have giant new businesses on the way. Alphabet, for example, experienced revenue growth of just 6%, the weakest quarter in a decade.
In practice, Big Tech have become institutionalized. Just like other big companies, take Coca-Cola: no one expects Coca-Cola sales to skyrocket anymore.
And the metaverse?
Big Tech heavyweights, of course, try to convince investors otherwise. You know the story of the metaverse of Meta or of the Apple AR viewers, Or Hololens from Microsoft? Big maneuvers that fear the next big revolution in information technology that will generate a lot of economic activity and so on.
Of course. I'm not saying no. But these things are very expensive and very speculative. At the moment, the REAL Big Tech activities are far from any "revolution" whatsoever. Apple and Amazon try to launch their advertising businesses. Zuckerberg wants to "Tiktokize" Facebook and Instagram. Alphabet tries to relaunch YouTube, an "innovative" product that is nearly 20 years old.
As long as the big wave resisted (Since the 2008 crisis, the US government has lowered loan rates to almost zero and kept them there until recently) he let the boat go. If the money is essentially free, investors look for more speculative bets, which increase the value of the companies they are betting on, which convinces more investors to pile into the same thing and repeat.
Now, as it happens, the US financial "lifebuoy" has failed, and as it happens, Big Tech stocks have started to plummet.
Big Tech: "do not die, but badly Campania"
The big tech companies (which are really big and really profitable) won't go away, but their valuations are going down. A rough way to measure investor enthusiasm is through the ratio that compares a company's stock price to the value of its earnings. Meta, for example, had a price-to-earnings ratio of 32,75 at the end of 2020; it is now down to 9.434. Alphabet dropped from 34.32 to 19.14
Of all, however, the most important clue of "adulthood" and the end of hot spirits is another: almost all the men who started and managed the big tech companies have given way to professional managers. It's more fun to do other things.
Big Tech become "Middle Tech", but that's not bad
This crash is not necessarily negative. Take Facebook, which has hired more than 19.000 people in the past year (a 28% headcount increase). It will now hold the brakes for at least another 15 months: very few hires and no turnover with those who leave, cut deadwood.
Do you know what it means? (Now you will call me an incurable optimist) It means that all future, lost employees of Facebook will join the ranks of other companies.
Maybe more innovative startups.
In recent years it has been said that Big Tech companies had grown so large that it was impossible to do something new without their permission. They are still big and powerful now, but maybe not that much for the kind of person who wants to do a new thing.
Make way for the future!