The FAANG Era is Coming to An End! Only Triple A can Sustain the Storm

The stormy market is here to bid goodbye to FAANG and say hello to Triple-A in 2022

FAANG is not a Chinese word. It is the acronym of Facebook (now Meta), Amazon, Apple, Netflix, and Google (now Alphabet). The acronym, popularized by CNBC TV's mad money host, Jim Cramer, in 2013, became part and parcel of the financial world very soon. Its original version was FANG but the changed form, with an added 'A', emerged in 2017 with Apple being made part of it— the beginning of Triple A. The FAANG era is said to have dawned the moment these big-five tech companies, which need no introduction, had a combined market capitalization of US$7.1 trillion by the first quarter of 2022. At one point in time having FAANG stocks became a habit with large investors around the world, and that would add to the ever-growing momentum in the stock price of the big-five tech companies. But in a world that is so regularly unpredictable, even the FAANG era may be facing extinction.

Even when the FAANG era was peaking there was a debate among the investors. The debate revolved around the question of whether the FAANG stocks are overvalued. Those who were ardent advocates of the FAANG era did not believe that it was so. Their logic was that the value of the stocks is sourced from the huge capacity and strength of the big-five tech companies. Those who were not buying this logic pointed out that despite the financial power at the disposal of these companies the stocks have become too expensive and because of that, it will not be an easy future cut out for the investors who are out there to make long-term profit out of them. They were referring to the "bubble" that FAANG stocks have created and they were sure that it was going to burst someday. It seems the latter group is having the last laugh since the end of the last year.

The crack in the FAANG became too evident to ignore when in November 2021, it was clear that the Federal Reserve System, the central banking system of the United States of America, decided to raise interest rates as a strategy to contain inflation. Except for Apple, all the other four of the big five tech companies took the hit and faced a perceptible decline as per S&P 500. For Apple, it was +15%. Impressively high. But for the Triple A, Alphabet, it was -3% and for Amazon, it was -9%. Facebook (Meta) took a heavier blow with -29% dip. But the heaviest blow was reserved for Netflix— as high as -39%. While Apple will continue to move upstream Alphabet and Amazon are capable of tiding over the crisis as the Triple A. But it is not going to be easy for the companies with the heavier blows. Mark Zuckerberg's promised Metaverse has not yet shown any sign of the realization of its much-publicized "great potential". Investors have become worried about Meta's failure to make a turnaround and the company is losing users and investors with alarming regularity. Netflix is no less in dire straits. Subscribers are leaving it for other online streaming platforms for less expensive but equally good content. It will be extremely difficult for Netflix to recover its top position in the highly competitive online streaming domain. With the FAANG architecture cracked beyond repair it is now Triple A all the way.

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