Two Tech Titans Take Their Lumps
The market has humbled Facebook and Netflix in recent weeks, proving that today’s tech giants are just as vulnerable as everyone else.
It’s been a rough stretch for Mark Zuckerberg and Reed Hastings. Given their companies’ shockingly poor stock performance in recent months, one might even say that these two tech titans have been defanged.
Zuckerberg and Hastings, the CEOs of Facebook and Netflix, respectively, represent two-fifths of the vaunted FAANG group, which also includes Amazon, Apple, and Google. As CNBC reports: “In the five months since the Nasdaq’s peak late last year, Netflix and Facebook (now Meta Platforms) have gotten crushed, giving up most of the gains they’d accumulated over the prior half decade. Netflix is down nearly 68% since the Nasdaq peak on November 19, while Facebook has lost over 45% of its value since then and is down more than 50% from its high two months earlier.”
Just how big and bad is the FAANG group? Economist Stephen Moore puts it in perspective: “Among the five of them, their market cap reached $6 trillion last year, which is more than the GDP of all but a small handful of entire countries. Moreover, their net worth is larger than the entire annual output of India, with more than 1 billion people.”
So when Netflix, the video streaming service that has become nearly as ubiquitous in American households as high-speed Internet, loses a whopping 35% of its stock value, which it did last Wednesday, it leaves a mark. But that’s what happens when you lose subscribers for the first time in more than 10 years, and when you report that you expect to lose as many as two million more in the current quarter. As Moore notes, Netflix’s Black Wednesday was one of the most significant single-day sell-offs in the history of stocks.
Facebook, which reports its earnings next week, isn’t likely to take as big a hit as Netflix, but the folks whose CEO brought you President Joe Biden will likely get some additional comeuppance to go along with the creative destruction they felt when they missed their numbers during their last earnings report in February. Indeed, Zuck’s social networking behemoth has lost a stunning half a trillion dollars of late.
Moore, the unabashed free-marketeer who was once the senior economics writer for the Wall Street Journal’s editorial page, laments the loss of wealth caused by the collapse of these widely owned stocks. But, he writes, the ultimate effect is a good one:
I carry no water for Big Tech, and I’m as frustrated with the free speech infringements against conservatives as anyone. But cries of “monopoly” are so early 20th century. Just as no one worries about Standard Oil, Microsoft or General Motors taking over their industries, we see the same cutthroat survival tactics in the hypercompetitive tech sector. This kind of competition is great news for the consumer. It lowers prices and makes a mockery of the “monopoly” rants.
As he rightly notes, our nation dominates the tech world because we’ve allowed the digital economy to remain mostly tax- and regulation-free. On the other hand, of course, we’ve allowed these Silicon Valley leftists to suppress the free expression of those with whom they disagree politically. But that reality, too, was dealt a serious blow this week when self-proclaimed free-speech absolutist Elon Musk acquired Twitter.
What’s next? It’s hard to say. And it’s hard to imagine that the likes of Google and Amazon are looking over their respective shoulders. But they are. And they ought to be.
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