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We are quite well aware that FAANG stands for Facebook, Apple, Amazon, Netflix, and Google. FAANG companies dominate the entire tech industry. They lead the way to innovation and deliver some of the most cutting-edge tech services to suffice the demands of the customers. Not just FAANG stocks but all big tech stocks have grown by leaps and bounds over the years and have attracted plenty of investors towards it. Tech stocks have seen ginormous growth prospects in 2021 as the world fell on the shoulders of advanced tech innovation to fight against the horrors of the pandemic. Businesses were shut and leaders were forced to coordinate with employees to conduct operations from home. Even though the mainstream economic and financial markets were drowning, the movements of tech stocks gave hope to its investors. However, as we proceed toward 2023, almost all big tech stocks including FAANG stocks seem to have lost their charm. The stocks are constantly making it to the news, however, not because of their constant growth but mostly due to their falling values.
The S&P 500 is ranked by market value, out of all the tech companies, the FAANG companies comprise almost 13%-17% of the entire market value of the S&P 500. The falling value of these mega-tech companies is responsible for the decline of the big tech sector. Earlier, the interest rates were lower, hence, investors were most interested in paying up for growth stocks and riskier assets that were most probable to yield productivity gains. However, due to the ongoing recession, the Fed's increased the interest rates making investment initiatives to die down over the course of 2022.
Furthermore, as businesses brace themselves to face a potential recession in 2023, tech companies are conducting mass layoffs to immune themselves from further economic woes. Amazon and Meta will reportedly continue their layoffs until 2025. Apple, Microsoft and others are conducting hiring freezes to cut down on employment costs. Besides, even certain tech startups are also compromising on innovation and cutting down operational costs.
Several global factors are responsible for the downfall of the FAANG stocks. Even though it is difficult to predict as to when the market will recover, experts are quite certain that investors will continue to depend on FAANG stocks for profits in the upcoming months.
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