The whiplash that has spread through leading tech stocks has left investors facing an uncomfortable reality: Wall Street can no longer take the invincibility of Big Tech for granted.
Rising political anger, a worry that the Big Tech boom will soon have run its course and the sense that an economic turning point may have been reached in the US have combined this week to threaten one of the underpinnings of the stock market boom.
The wild two-week swing in tech stocks, which included a bloodbath on Tuesday, began with reports of a massive leak of personal data from Facebook, and was extended by fears of a White House vendetta against Amazon.
Since then, the social networking company』s shares have dropped 14 per cent, losing about $75bn in stock market value and wiping $10bn from the personal fortune of co-founder Mark Zuckerberg. Amazon, which found itself on the receiving end of another tweet from President Donald Trump on Thursday, has shed $61bn, Apple $54bn, Alphabet, parent of Google, $62bn, and Microsoft $26bn.
Despite the volatility that crept into a group of stocks that have led the market higher, Big Tech』s loyal army of fans among Wall Street analysts remained bullish.
After years in which it has paid to have a 「buy」 recommendation on Big Tech, stock market analysts have largely reiterated their confidence in the sector』s fundamentals, despite the ructions. For Facebook, 44 of 48 analysts recommend buying the stock, according to Bloomberg data. Forty-eight of the 51 analysts covering Amazon rate it a buy.
Investors have been nervous for months that the growing political backlash against Big Tech would lead to a new wave of regulations or taxes, though they did not have anything specific to attach their fears to.
Now they do. The news that the personal information of some 50m Facebook users had been leaked to a data analysis firm that helped the Trump presidential campaign added to a wave of anger against the social media company on both sides of the Atlantic.
「The social media privacy concern which has hit Facebook』s shares now adds to wider worries over US and European regulation in the IT sector,」 Steven Wieting, global chief investment strategist at Citi Private Bank, wrote in a note to clients. 「Consumer data has become a highly valued commodity and a few IT firms are coming to dominate industries. This raises fear over market competition in certain countries.」
Concerns that political risk for the big tech companies is reaching a new peak were underlined this week when Mr Trump took aim on Twitter against Amazon. The president has made no secret of his dislike of Amazon, whose founder, Jeff Bezos, is the owner of the Washington Post, which has led much of the reporting about recent chaos in the White House.
Some analysts also pointed out that Amazon』s surging stock price, unlike that of other big tech companies, has not been underpinned by solid profit growth, though Wall Street long ago came to terms with judging the ecommerce company differently from its main rivals.
In another sign that investors in some tech high-flyers may have set themselves up for a fall, shares in electric carmaker Tesla slumped after news of that one of its vehicles had been involved in a fatal crash and new worries spread about its finances.
The reversals this week highlighted the market rally』s reliance on a small number of big tech stocks, making it highly vulnerable to shocks in the sector.
The S&P 500』s overall move during the first quarter was heavily dependent on tech. Facebook alone contributed 11 per cent of the index』s loss during the period — though Amazon』s rise, despite the March wobbles, more than offset this, contributing more than 18 per cent of the upside to the index during the same period.