Over $800 billion wiped from largest US internet companies in 12 months

The internet giants of the United States have historically been some of the most valuable companies globally, with their performance even influencing the general stock market. However, in light of the current economic uncertainty, these companies have suffered significant losses in their market capitalization, a factor likely to have far-reaching consequences on their future operations.

In this line, data acquired by Finbold indicates that as of April 26, the largest internet companies in the US lost a total of $814.56 billion from their market capitalization over the past 12 months. As of April 2022, the companies controlled a market cap of $4.34 trillion, while in 2023, the figure stands at $3.53 trillion.

Streaming platform Netflix (NASDAQ: NFLX) was hit particularly hard, with a loss of 36.18% in market cap, bringing its current capitalization to $143.84 billion, down from $225.39 billion in April 2022. Airbnb (NASDAQ: ABNB) follows closely with a loss of 29.36%, currently valued at $70.89 billion. Amazon (NASDAQ: AMZN), the second highest-valued internet company in the US, experienced a market cap drop of 28.43% over the last 12 months, presently worth $1.05 trillion. Other notable losses include PayPal (NASDAQ: PYPL) at -19.22%, Alphabet (NASDAQ: GOOGL) at -15%, and Uber (NYSE: UBER) at -3.16%.

Elsewhere, online travel firm Booking Holdings (NASDAQ: BKNG) experienced gains of 10%, increasing its market cap from $90.52 billion to $99.58 billion. Equinix’s (NASDAQ: EQIX) market worth increased by 2.09% from $65.04 billion to $66.40 billion.

Market uncertainty takes a toll on internet companies 

The decline in the market cap of the highlighted companies correlates with the prevailing economic downturn that has emerged from tightening monetary policies and higher inflation, contributing to heightened stock market volatility. Indeed, the market cap drop is contrary to the companies’ and broader technology sector performance, where they have historically exhibited resilience amid economic uncertainty.

The plunge in capitalization is also a direct implication of a general decline in investor confidence across the industry. Despite remaining highly profitable, these companies are now operating in an increasingly cautious market as investors sit on the sidelines for improved conditions.

Investors have shifted their focus from what drove businesses during the pandemic and the strong bull market in recent years. They are now directing more capital towards safer investments. This change in investor behavior underscores the need for companies to be adaptable and prioritize sustainable growth strategies that can weather changing market conditions.

Notably, the fallout from the market conditions has now shifted to the operations of the internet companies. Some companies have jumped on the bandwagon of widespread measures of cost cuts, freezing new hires, and laying off staff. 

It’s also worth noting that some experts believe that the current valuation of tech stocks shouldn’t necessarily be cause for concern. While there’s no denying that tech stocks enjoyed a period of stretched valuations and strong outperformance compared to other sectors in the wake of the pandemic, some argue that this is simply part of a larger cycle of market volatility. Therefore, internet companies have faced the challenge of justifying their valuation. 

The case of Netflix

Out of all the internet companies affected by the recent market downturn, streaming giant Netflix seems to have taken the hardest hit. While macroeconomic factors undoubtedly played a significant role, the company’s situation can also be traced back to other factors, such as increasing competition, password sharing, and the lifting of pandemic restrictions.

During the pandemic, Netflix benefited greatly from stay-at-home orders as more people sought out digital entertainment. However, in recent months, with the rollout of vaccines and the easing of mandates, people have been spending less time on digital platforms. This has undoubtedly contributed to the stagnation in subscriber growth that Netflix has experienced.

What next for internet companies?

Despite recent market volatility, there remains a bullish outlook for the tech sector, mainly due to the industry’s historically known resilience as a key factor. One potential driver for growth in the sector is the expansion into new areas such as artificial intelligence (AI). Many internet companies are already investing heavily in AI, and experts believe this trend will only continue in the coming years. By leveraging the power of AI, companies can improve efficiency, reduce costs, and gain a competitive edge in their respective markets.

With the tech industry becoming increasingly competitive, companies must continuously innovate and adapt to new trends to remain relevant and sustain their valuation. By doing so, they can increase investor confidence and funding. At the same time, investors will be keeping an eye on the economic outlook and the Federal Reserve monetary policies on containing inflation.