The FAANGs: A tech sell-off sinks the market
“The giant U.S. tech stocks that long powered the bull market have been downright bloodied,” said Kate Gibson in CBSNews .com. The country’s leading tech stocks— Facebook, Apple, Amazon, Netflix, and Google’s parent company, Alphabet, collectively known as the FAANGs—took a nosedive last week. Since their peak in September the FAANGs have lost a trillion dollars in market value. Why? Several factors are at play: There’s some “downright dismal” news from giants including Apple and Alphabet. Apple, for one, reported a softerthan-expected demand for its new $1,000plus iPhones. Amid privacy-breach and fake-news scandals, tech faces the increased likelihood of government regulation. And worries about new tariffs on products like semiconductors “are blowing through supply chains” for the whole industry. Even if you don’t hold individual stocks, the FAANGs affect you. “Big-name mutual funds loaded up on Apple stock,” said Mike Wuerthele in AppleInsider.com. Some of the funds had already started to “ditch other tech firms” earlier. So mutual fund investors are caught in the sell-off, too.
“So spectacular was the FAANGs’ rise,” said The Economist, “that they were bound to fall back sooner or later.” This wasn’t a failure in tech. For months we’ve had a choppy market in which a few companies managed to stay above water, and investors cheered as Apple and Amazon each hit the magic trillion-dollar value. Now “the anxieties that have undermined the rest of the stock market, such as signs of weaker global GDP growth and the trade war between America and China, have caught up with tech.”
There are some “self-inflicted” reasons for tech stock drops, said Joe Chidley in the National Post (Canada), but fundamentally nothing has changed:
The FAANGs are “still as dominant as ever.” Though they get grouped together, they are very different businesses. What unites them is that they are all “famous consumer-directed companies”—and they command their fields. Google’s and Facebook’s PR struggles don’t change that. Social media “isn’t going away”; Amazon has revolutionized retail and dominates the cloud-computing business. For tech in the past, “every boom was accompanied by a bust,” said Adam Seessel in Fortune. That has changed. The FAANGs have built huge platforms that lock in users. “It’s difficult to see how Alphabet’s Google subsidiary will lose its 95 percent market share in mobile search.” Over the long run, these companies are the main drivers of value in the U.S. economy. Consider this: For many years, the revered value investor Warren Buffett avoided tech, believing he didn’t really understand it. Now his firm holds $50 billion in Apple stock, twice as much as in any other investment.