Tech giants’ collapse continues, so what should investors do now?

Facebook, Amazon, Netflix, Google, Uber and Spotify are all suffering share price falls, but it’s not like the 2000 tech wreck.

I suffered some FOMO last year as global technology giants went from strength to strength on stockmarkets.

This fear of missing out was fuelled by a decade-long boom in share prices of Netflix, Amazon, Apple, Facebook, Microsoft and Google’s parent company Alphabet – companies that have booked billions of dollars of profits as people everywhere use them every day. I didn’t own any of them, and almost bought in.

However, in the past 12 months, these stocks have crashed back to Earth. Someone suggested to be that my FOMO has become JOMO – joy of missing out – but it’s hard to feel happy when so many young investors have seen their first foray into the stockmarket quickly became soul-crushing.

Shares in Facebook and Instagram’s owner Meta have plunged 73 per cent in a year, streaming giant Netflix is down 60 per cent, Amazon has dropped almost 50 per cent and Alphabet gets a C-minus for its 44 per cent slide.

Stockmarket investors have been switching off Netflix. Picture: Chris Delmas/AFP

Microsoft is down 35 per cent while Apple has fallen 8 per cent – a relatively good performance. Beyond the big six, other tech stocks have shrivelled too, with heavy falls by Snap, Spotify, Uber and others.

It’s a tech wreck, 2022 style, and reflects factors such as high interest rates making growth stocks less attractive and depressing demand for technology purchases, disappointing profit results, a surging US dollar causing reduced overseas earnings, and worries about a global recession in 2023.

However, unlike the dotcom crash in 2000 when technology companies with no revenue or profits collapsed – and rightly so – many of today’s struggling tech stocks are still money-making machines. They’re just making less money than they were.

Ongoing profits and revenues are a key reason why many long-term investors should not automatically ditch tech giants, which can easily be bought via investment platforms and online stockbrokers.

Investment research giant Morningstar says many are trading well below its estimate of their fair value, which suggests they will deliver gains for shareholders in the future.

Local tech companies are suffering too. Morningstar’s Australian director of equity research, Brian Han, says Aussie IT stocks have been the worst performers on the ASX, down by one-third compared with a broader market fall of about 9 per cent.

He says it’s easy to be bearish on a downtrodden sector such as IT, but “the lack of love from investors often provides the most compelling long-term value opportunities”.

Morningstar says Aussie tech stocks WiseTech, NEXTDC and Megaport sit 18-59 per cent below its fair value estimates.

“In the midterm they will continue to struggle – no matter how good a company is, the overall market is now concerned with bigger things,” Han says.

“These stocks will always struggle if interest rates are going up. A long-term investor looks past that and asks ‘do these companies have a future?’ We think so.”

US tech giants have performed poorly on stockmarkets. Picture: Spencer Platt/Getty Images

This year’s tech collapse is a good argument for holding a diversified portfolio.

People who focused solely on tech had a brilliant ride upwards during the past decade, but falls of 50-70 per cent sure shock the system.

Investors who spread their money across sectors and countries – and other assets including property, infrastructure and fixed interest – have always been successful in the long run.

Morningstar’s Han says daily market noise makes investing harder, and it is often better to not do anything in times of turmoil.

“After all, take the long term out of long term investing and what is left is nothing but punting.”