Matein Khalid
Investor | Family Office CIO | Portfolio Strategist | Board Advisor | VC | Finance Professor
There will be a bloodbath in Nasdaq’s Big Tech Godzillas and size definitely matters in the tsunami of panic selling yet to come. Alphabet proved that digital advertising is not immune to global economic storm clouds as both Google Search and YouTube revenue dips were a shocker. Microsoft’s Azure proved that it does not live in cloud cuckoo land forever and forgive the awful pun.
I am stunned to see Amazon down 20% in the after market because not even a Nasdaq bear like me expected such a dismal outlook for e-commerce. Meta’s earnings were a predictable disaster even if its 25% share price plunge was not. Big Tech has proven without a shadow of a doubt that its growth and margins, unlike De Beers’s diamonds are not forever and EPS/margins, like Shakira’s hips, don’t lie. Something is dangerously wrong in a world where more than $1 trillion can be wiped out from the stock market because four Big Tech mega cap colossi miss their whisper numbers. My obvious conclusion is that a global recession and protracted highs in interest rates/inflation is not remotely priced into equities and credits, let alone rates and currencies.
Facebook’s operating margin dropped a ghastly 16 points from 36 to 20%. Alphabet margins fell 7 full points to 25%. Microsoft margins look optically safe due to the magic of self serving depreciation accounting but the song remains the same in the Evil Empire of Redmond but who is listening to the corporate propaganda from the Telugu C-suite – well I am listening as the MSFT 320 short attests.
Apple did not trigger a heart attack for its devotees but the trend is not your friend when 70% of your revenues are outside the US, 26% are in Europe and untold millions of your iPhones/devices are produced by Chinese women at a time when President for life Xi is on the warpath.
A 68% surge in Meta’s capex and 31% rise in Alphabet’s capex demonstrates that strategic planning and financial discipline is not exactly a paramount priority in the boardrooms of Big Tech. It was insane for Sunder Pichai to authorize 12,765 new workers in the last 3 months at a time when Mr. Market was screaming in pain from his global macro wounds. Zuck is willing to lose billions of dollars to create his metaverse even as Wall Street has wiped out almost $90 billion in market cap to punish him for his fantasies even as his core Facebook franchise atrophies.
The Amazon shock last night tells us that e-commerce’s spectacular growth metrics during the pandemic is now replaced by the grim reality of a recession that will not spare one of the true money making fairytales of the Digital Age. Wall Street believes in the bottom line and has no patience for imperial CEO fantasies when the global economic scenario has turned sour. Meta’s fall from grace only proves that evangelism for pioneering technology does not pay on Wall Street, which just wants technologies leveraged to the digital growth engine as Apple proved with smartphones in the past decade.
Also published on Medium.
