Technology companies are living through a market rout not seen since the embers of the dotcom crash. The Nasdaq has fallen for seven consecutive weeks, the longest losing streak since 2002, and is down 30pc this year.
Investment bankers who were busier than ever this time last year during the Spac frenzy are twiddling their thumbs. Bitcoin, once marketed as a hedge against inflation, has crashed too. Elon Musk's $44bn (£35bn) agreement to buy Twitter a month ago is looking more ill-timed by the day . The superstars at the World Economic Forum in Davos this week are not youthful internet entrepreneurs but nonagenarian diplomats and financiers.
A combination of a global inflationary crisis and the subsequent rise in interest rates has been a sharp rejoinder to any tech worker under the age of 35, who has only ever experienced their employers becoming richer and more powerful.
Such an environment is starting to take its toll on most. This week, Snapchat's parent company warned that the "macroeconomic environment has deteriorated further and faster than anticipated"; its founder Evan Spiegel told staff the company would dramatically slow hiring.
Meanwhile, Uber's chief executive Dara Khosrowshahi recently told employees the company would have to focus on profit over growth in response to market conditions – a remarkable U-turn given its reputation for chasing the inverse.
Those are the milder cases. Many tech companies have enjoyed a near-unlimited tolerance for profligacy from their investors' are now being forced to slash costs. Robinhood, Peloton, Netflix and PayPal are all losing staff, some for the first time. In many cases the downturn in market conditions is compounded by the end of coronavirus lockdowns, which have seen consumers give up pandemic habits such as indoor cycling.
For start-ups that rely on regular injections of private capital to stay afloat, the crisis is worse. Klarna, the Swedish buy-now-pay-later firm, is slashing 10pc of staff and is in talks to raise funds well below the $46bn valuation it was granted a year ago. Gorillas, one of a flood of instant delivery companies that thrived during lockdown, has fired half the employees at its Berlin headquarters.
But the slump is not hitting all companies equally. Silicon Valley's giants – the big five of Apple, Amazon, Microsoft, Google and Meta – are not only more likely to ride out the wave, but possibly stand to profit from it.
While many of their smaller rivals are having to turn to careful cost management, Big Tech is highly profitable and swimming in cash. Combined, the five companies are sitting on more than $600bn in reserves. None are at risk of much revolt from investors: Facebook and Google are controlled by their founders, and the others have enough of a track record to brush off any revolt.
Whereas staff at less-stable tech companies are seeing the stock awards that make up the majority of their wealth evaporate, the big five are able to top up employees' pay with hefty cash bonuses.
The tech giants will see a slump in valuations as an opportunity to go shopping. Amazon has been linked with a takeover of Peloton , which is worth a tenth of what it was a year ago. If Apple wanted to acquire an electric car company to boost its long-running vehicle project, now might be the time.
Downturns are a good time for predators. The early months of the pandemic gave Big Tech a vital lesson in the opportunities created by a crisis. When economies were on the brink and other companies went into survival mode, the likes of Amazon and Apple enjoyed record levels of growth.
Investing now by buying up ailing competitors allows the companies to consolidate their grip on potential future waves of technology, such as virtual and augmented reality.
Big Tech has found large acquisitions off the table for the last few years as competition watchdogs take an increasingly dim view of them. But if a company faces extinction, regulators might be tempted to turn a blind eye to it being hoovered up by a Silicon Valley giant. This is doubly the case if authorities are focused on more pressing issues such as inflation.
But at the same time, the clamour for action will become louder. The disparity between business rates paid by physical retailers and online giants becomes more acute as prices are going up. Amazon is already seeking to reduce this by offloading warehouse space.
Calls for the Government to invest in the flotation of Cambridge microchip company Arm , one of Britain's only world-leading tech companies, could grow louder. A rumoured alternative is for a consortium of tech giants to lead a New York IPO.
But opponents of Big Tech will not find the track record encouraging. Government plans for a Digital Markets Unit with powers to more heavily police competition abuses have been bogged down. Political gridlock in the US means intervention there is even less likely.
The lesson that tech companies learned from the dotcom bubble bursting was that those who are able to tough it out will enjoy greater riches in the future. Silicon Valley giants are likely to take that to heart this time.
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