The growth of the five biggest tech companies – Alphabet, Amazon, Apple, Meta and Microsoft – is expected to slow in Q3, but how could that affect crypto?
With tech stocks and crypto markets now exhibiting remarkable correlations, any negative news for big tech could signal trouble for the cryptocurrency.
Traditional Markets and Crypto Show Correlation
compared together deployment of Earlier this month on Twitter, a user showed how the traditional market and crypto are increasingly connected. Since early 2021, traditional markets and crypto have shared common trend lines as well as spikes.
This led the user who goes by the pseudonym “monster“On Twitter, to conclude that Wall Street” treats bitcoin and crypto simply as extensions of the tech sector.
Should individual investors come to the same conclusion, correlation means that the success or failure of technology companies is of strong interest to investors in the crypto sector.
The “big five” technology companies will update investors this week. Alphabet and Microsoft will be the first to announce their Q3 figures at market close on Tuesday, Meta will announce their near markets figures on Wednesday, and Apple and Amazon will complete the set when they announce their market close figures. . on Thursday.
Will crypto snap with snap?
On Friday last week, Snap (Snapchat’s parent company) announced worse-than-expected results, with revenue rising just 6% to $1.13 billion, while net loss jumped 400% to $360 million from $72 million. The data in the hours following the announcement led to a 20% drop in the company’s shares.
If Snap’s woes were to be repeated in the technology sector, the consequences could be disastrous for both tech and crypto. However, there are reasons to believe that Snap’s issues are specific to the company itself, and will not marry the broader technology sector.
Snap recently restructured its organization, laying off 6,500 employees at a cost of $150 million. This one-time cost has weighed heavily on the company, suggesting that their results may have been an outlier rather than ideal. The company’s revenue is also heavily ad-focused which isn’t true of all of its larger peers.
Slow growth forecast for tech companies
Tech and crypto have been increasingly linked since 2021, but this may be partly a result of macroeconomic conditions. The recent turmoil in nation-state economies around the world shows that some markets are immune to global conditions.
According to a report in financial Times On Monday, growth in the top five tech companies is expected to slow to around 10% this quarter, down 29% from the same period last year.
If the Big Five announcements are broadly in line with these expectations, the impact on the market could be minimal. Price action may become more pronounced if results differ wildly from forecasts.
Of the big five, meta is probably the one that investors may be most concerned about. Since the rebranding from Facebook, the company has invested heavily in Metaverse and Web3 technologies. At the same time, its core business has come under increasing pressure.
Like Snap, Meta relies heavily on ad revenue, and ad budgets are the first cost-saving companies make during difficult economic conditions. Changes to Apple’s terms have made ad targeting more difficult for the company.
Meta is expected to announce that revenue slipped 5% in Q3, after declining 1% last quarter.
Now at least one major shareholder is demanding that the company change its strategy by severely slashing its Metaverse spending and reducing staff.
Meta encouraged to make cost savings
In an open letter to Meta, Altimeter Capital Chair and CEO Brad Gerstner demanded that the company cut employee spending by 20%. Gerstner further urged Mark Zuckerberg to focus artificial intelligence (AI) on the metaverse and reduce spending later.
Gerstner now needs to limit Metaverse-related spending to $5 billion per year, according to Meta. Expressing the general unease of traditional investors, Gerstner said “Meta needs to get back its mojo” and be “fit and focused.” Gerstner continued, “People are confused about what the metaverse means.”
The investment chief indicated that Metaverse is a long-term project that may not bear fruit for at least 10 years. At current annual spending levels of $10 billion or more, those spending levels have intimidated investors.
“The projected $100B+ investment in the unknown future is super-sized and terrifying, even by Silicon Valley standards,” Gerstner said.
While Gerstner may not get her wish, there are some indications that Meta intends to tighten her belt a bit. Last month, Mark Zuckerberg confirmed that META would end 2023 as a “somewhat small” organization following the hiring freeze.
This small concession could provide thin grit for Wall Street sharks chasing more immediate returns.
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