US Technology Shares: How did they perform in 2022
How US tech stocks performed in 2022?
Technology shares have had their worst year with the Nasdaq Composite index, a bellwether for technology stock performance, recording its worst yearly performance since the stock market crash of 2008.
The Nasdaq index was the worst performing among other US stock market indexes like the Dow Jones Industrial Average and the S&P 500 as soaring inflation pushed the US central bank to continuously hike interest rates throughout the year.
The Nasdaq index ended 2022 34% lower, compared to the 20% fall in S&P 500 and 9.4% fall in Dow Jones.
Now, technology shares do not perform really well in a high interest rate scenario as rising interest rates eat into the future profits of these tech firms.
US Tech stocks 2022: What led the drop
Central banks around the world along with the US have been raising interest rates to fight soaring inflation stemming from supply chain problems related to the COVID-19 pandemic and an energy crisis related to oil producer Russia's Ukraine invasion.
Along with domestic worries, investors around the world have also been monitoring China, the world's second biggest economy, for signs of weakness.
For technology companies like Tesla and Apple, China counts as a key market when it comes to manufacturing and sales. China's economy has been under pressure this year too due to strict Covid-19 policies, which also have led to demand issues and supply side concerns.
US Tech stocks 2022: Top 5 tech stocks’ performance overview
Tesla:
Shares of Tesla fell 65% this year, recording their worst year, quarter and month on record.
- Stock of the electric car maker has lost ~46% in value since late October after CEO Elon Musk completed his acquisition of social media platform Twitter in a deal amounting to $44 billion
- Concerns that Musk is diverting his focus and resources to Twitter ahead of Tesla have been a drag on the electric-vehicle maker's stock
- Elon Musk liquidated huge sums of his holdings in Tesla to fund his Twitter takeover, leading to a heavy drop in investor confidence. Musk last sold $3.6 billion worth of Tesla shares in December.
- Tesla shares also dropped amid rising demand concerns in China. The electric car maker paused operations at its Shanghai plant, which is its largest factory, in December, pushing down stock prices.
- Musk added that Tesla’s long-term fundamentals are "extremely strong", however, "short-term market madness is unpredictable"
Meta:
Shares of Facebook parent Meta Platforms dropped 64% this year to its worst year on record.
- In 2022, Meta faced risks arising from slowing global economic growth, competition from Chinese short-video app TikTok, privacy changes from Apple and concerns over massive spending on the metaverse.
- In November, Meta said it would cut more than 11,000 jobs, or 13% of its workforce, amid a crumbling advertising market and decades-high inflation.
- Stock slumped consistently since October after the social media company forecast a weak holiday quarter and more costs next year.
- Susan Li, the chief financial officer of Meta, was recently appointed as the new CEO of the company.
Netflix:
Shares of video streaming platform Netflix dropped 51% in 2022, its worst yearly performance since 2004.
- Media stocks got rocked this year, with companies losing billions of dollars in market value, as streaming subscriber growth waned and the advertising market worsened.
- Netflix reported that it lost subscribers for the quarter ended June— the first time in more than 10 years — heavily disappointing tech and media investors.
- Netflix has also begun exploring an ad-supported, cheaper option for customers, something the company had long said it wouldn’t do.
Apple:
Shares of the Apple dropped 26.8% in 2022, its worst yearly performance since 2008.
- Production halts in a major iPhone plant in China contributing to a supply shortfall of Apple’s flagship iPhones have pushed the stock lower
- Furthermore, rising Covid-19 problems in China also led to a demand issue for Apple’s products as China is one of the key markets after the United States.
- The stock has also suffered along with most technology shares amid risks from rising US interest rates.
Alphabet (Google)
Alphabet’s shares dropped 39% in 2022, to record its worst yearly performance since 2008.
- Alphabet shares were hit by a combination of slowing growth, falling profits, and compressing valuations in the tech sector as investors prepare for a recession.
- Alphabet's revenue growth slowed sharply in 2022, with revenue growth going from north of 32% at the end of 2021 to just 6% in the third quarter of 2022.
- Google’s parent company Alphabet is set to begin 2023 with mass layoffs in order to cut costs amid declining revenues.
US tech stocks 2022: What do analysts say?
Tesla: Stock market research firm Jefferson Research said that Tesla is is showing strong earnings quality and balance sheet quality, but valuation suggests a higher amount of price risk, and operating efficiency and cash flow quality are both weak. When combined, analysts believe Tesla deserves a HOLD rating.
Meta: One of the world’s biggest brokerages, Jefferies, had recently upgraded the stock to ‘Overweight’ from neutral. Jefferies believes heading into 2023, some of Meta's top and bottom line pressures including Apple privacy changes, TikTok competition and macro uncertainties will ease.
Netflix: Investment Bank Wells Fargo upgraded Netflix stock to ‘Overweight from ‘Neutral’ in December. Wells Fargo said Netflix's ad-supported tier will drive about 23 million subscriber adds by end of 2025 to 279 mln global subscribers against its prior estimate of 256 million.
Apple: Investment Bank JP Morgan lowered its FY23 revenue and earnings forecast for Apple citing lower expected sales amid Covid problems in China. JP Morgan cut Apple's price target to $190 from $200 in December.
This is not investment advice. Investments in the securities market are subject to market risk, read all the related documents carefully before investing. Past performance is not indicative of future returns.