Tech stocks witnessed a massive fall in 2022. While FAANG stocks led the market rally over the last few years, all of them are underperforming the S&P 500 in 2022. Wall Street analysts meanwhile see better days ahead for them in 2023.
Looking at the YTD price action, Apple is the best performer with a YTD loss of 25.7%. Alpahbet comes second with a loss of 38.4%. Amazon, Netflix, and Meta Platforms have lost over 50% each and are among the top 50 S&P 500 losers.
It’s hard to think of any other year where the once formidable FAANGs underperformed so badly. The crash in these stocks has created some dubious records. Amazon for instance became the first company ever to lose over $1 trillion in market cap.
Meta Platforms has also lost its status as a trillion-dollar company while Alphabet somehow managed to hold above that level. Apple also briefly fell behind Saudi Aramco in terms of market cap.
Big Tech US companies looked weak in 2022 and have looked to lose their dominance. For instance, the combined market share of Alphabet and Facebook in the US digital ad market has fallen below 50% for the first time ever. FAANG stocks have usually dominated the markets where they operate.
FAANG Stocks Crashed in 2022: Here’s Why
Netflix too lost subscribers in the first half of 2022. The company is facing stiff competition from Disney which now has more streaming subscribers than Netflix. Facebook and YouTube are also losing ad dollars to TikTok. While the US is looking to ban TikTok on state devices, it would not help much.
Amazon is also facing competitive heat as brick-and-mortar retailers like Walmart have ramped up their e-commerce operations.
FAANG stocks were also under pressure in 2022 due to slowing growth. Amazon’s sales growth fell to the lowest level in two decades in the first half of the year. AWS, which is Amazon’s cash cow also reported its slowest-ever growth in Q3 2022.
Meta Platforms, which is the worst-performing FAANG stock of 2022 has its own share of troubles. Its sales growth was negative in the last two quarters while profits have dwindled amid massive metaverse losses.
Apple is the Best Performing FAANG Stock of 2022
Apple has its own share of headwinds, particularly with regard to China. Along with a demand slowdown in that market, the company is staring at supply chain issues in the December quarter. Wall Street analysts expect Apple’s sales to fall slightly in the current quarter.
Analysts saw Apple as safe haven in an otherwise gloomy FAANG space. Even Warren Buffett, whose Berkshire Hathaway is the second-largest Apple stockholder, added more AAPL shares in the first half of 2022. There is a guide on how beginners can buy Apple stock.
Data Privacy and Antitrust Issues Have Hit Big Tech Companies
Data privacy and antitrust issues are another headwind for FAANGs. The EU has accused Meta Platforms used its dominant market position to unduly benefit the Facebook marketplace.
The Media bill in the US is another headwind for the company. If the bill gets passed, Facebook would need to pay news publishers for hosting content. The company is meanwhile not willing to do so and has instead threatened to remove news altogether from its platforms.
Apple would now allow alternate app stores on its iPhones in Europe under pressure from the regulators. Even Elon Musk faulted Apple’s App store policies for the massive fees that the company charges.
Alphabet is also facing antitrust allegations in several countries including the UK and India. It was the best-performing FAANG stock of 2021.
Analysts See FAANG Stocks Rebound in 2023
While FAANG stocks had a terrible 2022, analysts see better days ahead for them in 2023. Wall Street is particularly bullish on Amazon stock which has now underperformed markets for two consecutive years.
JPMorgan, Citi, and Bank of America are among the brokerages that have listed Amazon as a top pick for 2023. The prediction should be taken with a pinch of salt though and even last year multiple brokerages including Cowen, Bank of America, Jefferies, and Goldman Sachs named the stock as a top idea for 2022.
Big Tech is Not Dead, Yet
Bank of America is optimistic that Amazon would gain market share in the e-commerce market and increase its margins. We have a guide on how to buy Amazon stock.
While some have written obituaries of FAANGs and Big Tech companies, Michael Yoshikami, founder and CEO of Destination Wealth Management believes that Big Tech is far from being dead.
Speaking with CNBC, he said, “If you’re a long-term investor, I think you can kind of hold yourself through this difficult time and reposition to the names that are going to be the ones that are established and will move forward. It sounds very Warren Buffett-ish and that’s exactly how I’m looking at this in terms of playing the tech sector right now.”
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