Facebook, Apple, Amazon, Microsoft, and Google are set up to come out of a recession stronger and more powerful because they have a lot of cash. As usual.
So far this year, Apple, Amazon, Microsoft, and the companies that own Facebook and Google have lost a total of $2.7 trillion in value. This is about the same as Britain’s GDP for the year.
So, what have the companies done to stop Wall Street from getting beaten up? Microsoft has doubled the bonus pool for its employees, Google has promised to hire more engineers, and Apple has given $200,000 bonuses to its best hardware workers.
The contrast between the stock market’s relative panic and the tech giants’ business-as-usual attitude points to a time when analysts, investors, and economists think the world’s biggest companies will get even bigger in their own markets.
People are optimistic about their futures because they know that the companies run some of the most profitable businesses in the world, like social media, premium smartphones, e-commerce, cloud computing, and search. Because they are so strong in these areas and have a foothold in other businesses, inflation should hurt them less, even though it is hurting big companies like Walmart and Target and the stock market is getting close to bear market territory.
On Friday, the S&P 500 spent most of the day below the threshold for what is considered a bear market, which is usually 20 percent below its last peak. Later in the afternoon, it started to rise again. The index lost 3 percent over the course of the week, making it the seventh week in a row that it fell. It hasn’t lost that many games in a row since 2001.
In the coming months, Microsoft, Google, Apple, and Amazon are likely to hire more people, buy more businesses, and come out on the other side of a bearish economy stronger and more powerful, even if they lose some of their total valuation and their steady growth over the last few years.
Richard Kramer, who started the London-based consulting firm Arete Research, said, “Big tech can say, ‘Forget the economy.'” He said, “They can invest through the cycle” because they have a lot of money.
The plans of the big companies are very different from the wave of spending cuts that is hitting the rest of the tech sector. Share prices at companies that aren’t making money have dropped by a lot, like Uber, which is down 45 percent and Peloton, which is down 58 percent. This has led the CEOs of these companies to cut jobs or think about laying people off. As venture capital funding slows down, start-ups are getting rid of some of their employees.
Toni Sacconaghi, a tech analyst at the research firm Bernstein, said that the falling prices of these companies will create opportunities to buy. He said that it might be hard to make big deals because the Federal Trade Commission is looking into Facebook, Apple, Amazon, Microsoft, and Google’s plans to take over other companies. However, smaller deals for new technology or engineers might be common.
A financial data company called Refinitiv says that from 2008 to 2010, Facebook, Amazon, Google, Apple, and Microsoft bought more than 100 companies. This was during the Great Recession. Some of these deals are still important to their businesses today, like Apple’s purchase of the chip company P.A. Semi, which helped the company develop its new laptop processors, and Google’s purchase of AdMob, which helped the company start a mobile advertising business.