Is the “Tech Wreck” a new dot-com bubble bursting? In the Financial Times, Robin Wigglesworth suggests that the scale of wealth destruction currently happening in the market is underappreciated. He writes:
At what point does the slump in US technology stocks stop being dismissed as a mere “tech wreck” primarily centred on the most speculative companies and become considered a fully-fledged dotcom crash 2.0?
The combination of increasingly hawkish central banks and Russia’s invasion of Ukraine has been toxic for equity markets this year. The MSCI All-Country World index is now down 12 per cent in 2022. However, as is often the case, headline indices miss a more fascinating story underneath.
The pain has been primarily focused in US technology stocks. Despite a tepid bounce over the past week, the Nasdaq Composite index has already fallen nearly 20 per cent in 2022. In dollar terms, the tech-heavy market has now lost well over $5tn in value since its November peak — more than the Nasdaq’s dollar losses through the entire dotcom bubble unwinding in 2000-02.
Yes, the index is vastly bigger these days, But the scale of wealth destruction — and how painful it has been for many investors — is real and arguably under-appreciated, as the relative resilience of Big Tech is obscuring the extent of the damage.
Almost two-thirds of the Nasdaq’s 3,000 plus members have fallen by at least 25 per cent from their 52-week highs, according to numbers from Société Générale’s Andrew Lapthorne. Almost 43 per cent have lost more than half their value, and nearly a fifth have tumbled over 75 per cent — the worst such ratio since the financial crisis. The $5.15tn that has evaporated from the Nasdaq in recent weeks is like the entire UK stock market going “poof”.
Read more here.