The big tech crash is a term that reflects that 2022 hasn’t been a good year for the stock markets, especially for tech stocks. The tech-heavy Nasdaq index has fallen more than 30% since Jan 2022. It’s been falling into a bear market due to interest rate hikes, rising inflation, macroeconomic uncertainty, global pressures, and the strong US dollar.
Big Tech stocks collectively lost nearly $4 trillion in market value in 2022. In 2020 and 2021, one of the best places for stock investors to have their money was in mega-cap technology stocks. In 2022, it was one of the worst. Many media are speaking of the big tech crash as a phenomenon that will impact the technology and digital services sector. They are foreseeing a collapse in the following months.
The big tech collapse, which could follow the current big tech crash, will seriously impact our lives. And not only because we are experiencing how more than 16,000 workers in U.S.-based tech companies have been laid off in mass job cuts so far in 2023, according to a Crunchbase News tally. Consider also that last year, more than 90,000 jobs were slashed from public and private tech companies as they were forced to confront rising inflation rates and a tumultuous stock market.
For 2023, the party is over. Every major tech company—including Amazon, Meta, Snap, Stripe, Coinbase, Twitter, Robinhood, and Intel—has announced double-digit percentage-point layoffs in the past few months.
But the problem of the big tech collapse or the big tech crash is much larger than jobs. If you look at the major tech firms, they all profit from the mass commercialization of digital services. They are also one of the primary drivers of the global economy. What does this mean? It means that if the tech industry does not make a profit, a relevant share of the economy enters into recession, which may reduce consumption. And considering the significant wallet share digital services have currently, this will further negatively impact the tech industry.
The vicious circle formed by this phenomenon has a name in the economic jargon: the spiral of death. The larger the negative impact on tech companies is, the lower digital services consumption by society. This makes the negative impact on tech companies larger, etc.
We can’t be sure whether this spiral of death will occur until we see the true big tech collapse in front of our eyes. But the global economy does not face any countermeasure which could stop this trend. On the contrary, we expect higher interest rates and a progressive cool-off of the world’s largest economies on the planet…
So, be ready to keep your current smartphone for the next five years. And, if you want to know more about technology, here you have my recently published book about artificial intelligence: