Tech companies have seen a massive stock resurgence in the months following thousands of layoffs.
- The tech world has faced hundreds of thousands of layoffs since November, with multiple rounds of companies cutting thousands of employees from companies like Amazon, Salesforce, Alphabet, Microsoft, Meta Platforms, and Disney.
- Alternatively, tech stocks have seen a resurgence since January 1, with Meta (71%), Tesla (57%), Apple (24%), Microsoft (17%), and Alphabet (15%) seeing notable stock market gains.
- Investors have applauded the decisive actions of these corporations to thin payrolls, with many companies having the spare profits to engage in stock buybacks and seeing the enthusiasm from the ongoing artificial intelligence (AI) race, Axios reports.
Why It’s Important
The tech industry was flushed with newfound business and cash during the COVID-19 pandemic as the entire economy adjusted to remote work and lockdown mandates. Now the tide has turned. Inflation and recession fears have tightened the wallets of major corporations and tech companies, many of which reported notable losses in 2022. The layoffs could signal an imminent recession, Axios notes.
In the meantime, the stock resurgence is a positive indicator for tech companies worried about weathering the upcoming year of recession fears and high inflation. These two trends will not show positive signs until the companies begin rehiring lost positions, indicating that the economy is recovering and these companies are feeling more confident.
Academy Securities head Peter Tchir warned in a recent interview with Yahoo Finance that the tech boom of the pandemic era has set the tech industry several steps back, that demand is shrinking, and the equity in new projects is drying up. He is also skeptical that AI will be a saving grace for this year and that investors should prepare for tech companies to break their low-point valuations for last year.
“I think at some point, we are going to break last year’s lows on the S&P and Nasdaq. We are going to go through that because everyone kind of got bullish again, and we’re going to realize, oops, this is not as good. Consumers aren’t spending as much as people thought. Companies are still overburdened. We’re going to see that pressure point,” says Tchir.