Megacap tech stocks used to be surefire S&P 500 winners. Now they're generating losses like investors have never seen: $4.7 trillion and counting.
The value of the 15 stocks in the Solactive FANG Innovation index — including Microsoft, Alphabet and Meta Platforms — has plunged by more than 34% this year. That lags the S&P 500's 18% drop. And it's dramatically worse than the nearly 11% drop by blue-chip stocks in the Dow Jones Industrial Average.
Amazon.com joined the free fall, dropping more than 10% on Friday.
But here's the most important part. When you're talking about stocks with nearly $9 trillion in combined market value, a drop of this size translates into massive losses. Just these 15 stocks account for nearly half of the $11 trillion investors lost on stocks so far this year, says Wilshire Associates.
And these losses are a problem for everyone. These 15 stocks account for a staggering 25% of the value of the S&P 500. Simply stated: The bigger they are, the harder they fall.
Megacap Tech: From Losers To Winners
Just a year ago, no investor would be caught dead without giant tech stocks like Microsoft, Alphabet, Meta Platforms and Amazon in their portfolio. And now they can't sell them fast enough.
These 15 stocks on average are down 41% this year. Why? A string of disappointing earnings is souring investors on some. And with the others, lackluster outlooks for future profits are depressing valuations.
Profit at the companies is looking shaky, too. Ten of the 15 megacap tech stocks are seen posting lower profit in the fourth quarter than in the same year-ago period. The average drop? 45%. And the year isn't looking much better. Analysts think profit this year at eight of the 15 companies will fall, too.
Looking At The Big Tech Losers
Microsoft is the No. 1 loser in terms of market value this year. The software giant's stock is down 31%, wiping out more than $784 billion in market value. The company's third-quarter wasn't the problem. It reported profit nearly 2% higher than expected at $2.35 a share on revenue that topped views by 1%. But for the current quarter, Microsoft expects revenue of up to $53.4 billion, missing targets for $56.2 billion.
But other big-cap techs are showing they might have peaked.
Peaking Profits In Techland
With Google parent Alphabet, there are signs of profit having temporarily peaked. Shares of Alphabet are down more than 34% this year, wiping out $700 billion in market value. And in Alphabet's case, analysts think the company's adjusted earnings this year will fall more than 13% to $4.86 a share.
But that's nothing compared with the drop-off seen coming to Meta Platforms, the company formerly known as Facebook. It's a nightmare come true. The company's stock is down 70% this year — erasing a staggering $668 billion in market value. And now the company isn't even in the top 10 most valuable in the S&P 500, and barely in the top 20. Huge bets in VR are souring, likely knocking profit down 41% this quarter and 35% this year.
Even Amazon is getting pulled down as the company's outlook disappoints. Shares of the online shopping giant dropped 10% Friday after its earnings report and are down nearly 39% this year, wiping out $652 billion in market value.
Looks like big tech isn't necessarily big money anymore.
Has Big S&P 500 Tech Peaked?
| Company | Symbol | Stock YTD % change | Market value change this year (in billions) | Est. Q4 EPS % change | 2022 EPS % change |
|---|---|---|---|---|---|
| Microsoft | -30.5% | -$783.9 | -6.7% | 2.8% | |
| Alphabet | -34.9% | -$700.7 | -21.3% | -13.4% | |
| Meta Platforms | -70.4% | -$668.3 | -41.0% | -34.7% | |
| Amazon.com | -38.9% | -$652.3 | -85.0% | -106.4% | |
| Apple | -12.2% | -$427.5 | -1.5% | 0.6% | |
| Nvidia | -54.3% | -$400.6 | -40.9% | -24.3% | |
| Tesla | -36.7% | -$359.3 | 51.5% | 83.8% | |
| Netflix | -50.6% | -$134.5 | -66.2% | -8.3% | |
| Adobe | -42.9% | -$119.3 | 9.4% | 9.2% | |
| Intel | -44.1% | -$90.7 | -81.0% | -64.1% | |
| Salesforce | -36.7% | -$89.7 | 60.4% | -0.9% | |
| Broadcom | -29.2% | -$84.0 | 21.4% | 31.9% | |
| Advanced Micro Devices | -57.3% | -$74.5 | -12.0% | 31.1% | |
| Qualcomm | -36.1% | -$73.5 | 7.1% | 33.1% | |
| Micron Technology | -43.2% | -$46.8 | -96.3% | -15.9% |
Sources: IBD, S&P Global Market Intelligence based on Solactive FANG Innovation index
Follow Matt Krantz on Twitter @mattkrantz
