Friday 02 Jun 2023
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This article first appeared in The Edge Malaysia Weekly on October 31, 2022 - November 6, 2022

The jaw-dropping fall of the stocks of US tech giants over the past week, which wiped off nearly US$800 billion (RM3.8 trillion) in market value, has prompted 

investors to rethink the intrinsic value of the counters for which they once paid top dollar because of the anticipated exponential growth.

The disappointing financial results and weak outlook guidance from Google’s parent Alphabet Inc, Microsoft Corp, Meta Platforms Inc and Inc seem like a reality check on the steep valuations of tech stocks globally.

The better-than-expected earnings by Apple Inc — the most valuable US tech company — offered a glimmer of hope in a gloomy week, but its iPhone sales came in 

below analysts’ targets.

Adding fuel to the fiery selldown is Chinese President Xi Jinping’s precedent-breaking third term. Xi is known for cracking down on Chinese tech companies, many of which are listed on the Nasdaq, including Baidu Inc, Tencent Holdings Ltd and Alibaba Group Holding Ltd.

The market value of the Nasdaq has been slashed by a third so far this year, with Meta on the brink of falling out of the world’s top 20 stocks list. On Bursa Malaysia, the fall in the technology index is even bigger, down 40% year to date.

An optimistic tone was struck when investors started to dump tech counters 

early this year. While the US Federal Reserve’s hawkish policy to contain inflation was 

initially said to be the culprit, it is now 

evident that the tech rout is not a temporary shake-out, following the latest dismal financial results.

Is there another opportunity to gain from the tech space, as it is still a major contributor to economic development?

Given the recession fears brought about by the aggressive interest rate hikes globally and with liquidity drying up, perhaps the more relevant thought should be taking whatever profit is still left on the table, if not cutting losses, before the giant bubble bursts.

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