The massacre starts from the USA and China, with the giants Twitter and Tencent losing over 20% in the last month, and spreads like wildfire to other big names such as Facebook (-4,3% yesterday and -22% in one month), Microsoft (-2,88% yesterday), Google (-12% in one month), LinkedIn and Amgen to get to Netflix, Tesla, Pandora and Weibo, the Chinese Twitter about to be listed on the Nasdaq, which it is no coincidence that it lowered the initial offer price: from 500 to 435 million. Even the Korean Naver (-10%), the Japanese Rakuten (-7%), and Yahoo Japan which has lost 26% since March.
In all, according to what the Financial Times, $275 billion in stocks sold, with the world's 14 largest companies (9 in the US and 5 in Asia), each worth more than $20 billion, losing a fifth of their total stock value, equal to 1.400 trillion dollars. And all in stark contrast to the general trend of the stock markets, so much so that the same US newspaper points out that Google alone has lost twice as much in the last month as the entire Nasdaq lost in the same period.
What is happening to the high tech sector? Ft puts forward two kinds of explanations. The first, presented by Hemant Taneja, a Silicon Valley venture capitalist, considers the situation "normal and healthy. Speculation has been flushed out and once stock prices stabilize, lower valuations will make life easier for companies." The other explanation, by David Garrity, an analyst at GVA Research, is geopolitical: “The epicenter of risk in the world has shifted. With the crisis in Crimea a new level of geopolitical risk has emerged, while the change of leadership at the Federal Reserve and signs of a revival of US growth have shifted investor interest elsewhere”.
In the columns of the Financial Times, Garrity defines high tech stocks as "dilapidated": "After the boom with the bubble of 2000, they could become like canaries in a coal mine", i.e. more sensitive than others to negative situations, as were the birds used in mines to warn the gas level. “Once it was enough to add .com to the name of the company – adds Eric Cha, an analyst at Nomura, returning to the internet bubble -: investors didn't understand exactly what it was, but now they know it well”.
Now the Internet means 2,5 billion dollars in annual profits for Tencent and 1,5 for Facebook, just to be clear. “But the new challenge, the new hunting ground, is mobile,” writes CLSA analyst Terry Chen. After the dotcom boom, FT sees many similarities with what could be the new bubble, that of the business linked to smartphones. And so while the stocks lose, the app war has already begun: the 19 billion spent by Facebook for Whatsapp are proof of this. Which, after the decline in Zuckerberg's title in recent weeks, have become 17.
