TokSik times for Zuckerberg
Tech stock meltdown giving Meta boss a headache — and it’s bad news for NZ’s Super Fund too, writes Chris Keall
It’s easy to be tempted into a sense of schadenfreude with a number of titans being cut down to size in the recent tech stock meltdown. But bear in mind that their pain is your pain too.
Many of our KiwiSaver funds have ridden the tech stock boom. And, more broadly, all of us are exposed via the NZ Super Fund’s multibillion-dollar holdings in various US tech giants, from its US$1.56 billion stake in Apple to its US$1.24b holding in Microsoft, or its substantial stakes in the likes of Meta, Amazon, Alphabet and Tesla (more on which below) that have seen tech stocks dominate the fund’s top 10 global equity holdings and feature as some of its largest investments full-stop.
Meta founder Mark Zuckerberg has taken a US$100b hit to his fortune this year as his firm’s shares have dropped from US$336.35 to US$97.94.
Yesterday alone, his firm (owner of Facebook, Instagram, WhatsApp and The Metaverse) lost 24.6 per cent of its value, giving his personal fortune another hit (Zuckerberg has a 13 per cent stake in Meta). Zuckerberg’s wealth fell by US$11b over the Thursday (US time) session. He’s now down to his last US$36b.
Meta has struggled to deal with Apple’s privacy push, which has crimped Facebook and Instagram’s ad revenue tied to user-tracking, a slowdown in ad spending overall, TikTok stealing
its lunch with teens, and user disinterest in its virtual reality efforts — which lost $3.7b for the September quarter, with heavier losses forecast.
That matters to us because with its last global equities disclosure — for its holdings as of December 31, 2021 — the Super Fund had shares in Meta worth $417 million.
The table above right shows how the fund’s global equities top 10 was looking at its last disclosure statement, at the end of last year. The fund won’t provide a full update until it releases its annual report next week.
But it did provide the Weekend Herald with the value of its largest
tech holdings as of September 30 (the close of its reporting period; the fund has already disclosed that its value dropped $3.3b to $55.7b in the year to June 30 amid tumbling world markets).
Tech stocks staged a modest recovery in the weeks after September 30, but have been shredded this week on weakerthan-expected earnings. (Apple was a rare exception as it reported record revenue and a lift in profit.)
If its global equities portfolio hasn’t offloaded (or added) any Meta shares, the value of its holding in Facebook’s parent will
have fallen to $122m after yesterday’s bloodbath.
The lone NZX holding in the Super Fund’s top 10 — Fisher & Paykel Healthcare — has also been in the wars (or should we say out of the wars, as Covid recedes, reducing demand for its respirators). Shares have dropped from $32.76 on December 31 to a recent $19.25.
And our exposure is much broader than that top 10. The Super Fund’s December 31 disclosure also included smaller stakes in numerous battered techs including Cisco ($190m), chip makers Broadcom ($144m) and Texas Instruments ($143m), Adobe ($127m), Oracle ($115m), Netflix ($112m), Intel ($106m), Salesforce ($104m), smartphone chipmaker Qualcomm ($104m), Samsung ($78m), AMD ($68m), HP ($62m), ServiceNow ($50m), Nintendo ($31m), Autodesk ($24m), Palo Alto Networks ($22m), eBay ($20m), Uber ($20m) and Twitter ($14m).
The Super Fund’s stake in Pfizer has also withered. The vaccine maker’s shares were at US$59.05 when the fund reported the value of its holding at US$231m. The stock was recently trading at US$45.74.
Outside of its top 10, the Super Fund is ahead with major tech holdings Spark (where its stake was worth $211m as of December 31), Vodafone NZ and Canberra Data Centres co-owner Infratil ($137m) and Chorus ($58m) — although its smaller software holdings Pushpay ($35m), Serko ($13m) and Vista Group ($18m) have struggled.
Some tech stocks face broader issues than the global slowdown.
For example, it’s hard to gauge how Meta can hold off the TikTok tide while it tries to convince people to buy its new $2699.99 Quest Pro VR headset — and all as some commentators now call for change at the top, which would be tricky. The Super Fund banded with other institutional investors to push for more transparency and other government reforms. While the move was cheered by those looking for a more forceful response to hate speech and disinformation in the wake of the Christchurch mosque massacres, it was always going to be hard given the firm’s “super voting” tier that allows CEO and chairman Zuckerberg to exercise majority control despite owning a minority of stock. The Super Fund threw in the towel in October last year.
Tesla will have to navigate a world where nearly every single car maker is shifting to all-EV production and a related supply crunch in a number of the materials required for car batteries.
And it’s not clear how Nvidia can regain its dizzying heights. The formerly relatively obscure maker of graphics processing chips saw its market capitalisation rocket from US$81b in 2018 to US$735b in 2021 — making it one of the world’s 20 most valuable companies — as its technology became popular for bitcoin mining. With this year’s crypto crash, its market cap has more than halved. While crypto could come back, hugely power-intensive Nvidia-powered mining rigs are being replaced by a theoretical “proof of work” process, pioneered by Ethereum with others set to follow.
But, as a species, tech stocks are resilient. They have a history of bouncing back, as they did after the dotcom bubble burst and the GFC.
So if holds for the long term — which is its modus operandi — the NZ Super Fund could see the value of its tech holdings recover. Which would be good news for all of us.
A spokesman for the Super Fund said the responsibility for that decision has been delegated.
“The Fund’s global equity holdings are managed by a number of external investment managers. These managers have discretion to make decisions about which stocks to hold on the Fund’s behalf.”