There is much concern over the current status of the tech industry. Most companies lose tremendous stock value, and more pain is on the horizon. In addition, laid-off employees dump stocks left, right, and center, putting even more pressure on these battered markets.
Expect More Tech Stock Dumping
It has been a rough ride for most tech firms in late 2022 and early 2023. Industry giants like Alphabet and Microsoft recently announced more layoffs to start the new year. That is an unfortunate development, yet it appears there’s a good reason for this momentum. As these companies struggle to meet investor expectations, they must cut costs. Letting go of employees is the most obvious solution.
In addition, the market momentum signals another industry change. More specifically, the era of six-figure salaries is ending, as are the ridiculous office perks and pampering. Those not mandatory to day-to-day operations will be out of a job soon. Many firms have two or three employees for the same job, which is excellent during times of big business. Unfortunately, the business has slowed down for most tech companies. That also means demand for exposure to tech stocks has decreased and will continue to decrease further.
Roughly 90,000 tech firm employees were laid off in 2022. That number is likely to be eclipsed in the first quarter of 2023. Moreover, as we mentioned earlier, the layoffs intensify across various sectors. That will negatively impact tech stock further and force people to invest in alternative markets. Cryptocurrencies have seen a strong surge in the first three weeks of 2023, making them a more attractive investment. For the employees who are being let go, there is some degree of “vengeance” to be had, though.
Laid-off employees often hold a significant amount of company stocks. They can sell those tech stock bags on the secondary markets to get out every cent they can. During the tech boom of 2019-2022, many companies used “demand” for their tech stock to appease talented workers. That means these employees often received large bonuses and compensation in stock. It tied the recipient to the company further and ensured the company didn’t have to part with precious liquidity.
A Brutal Year Ahead?
It has to be said, 2022 was brutal for tech stock overall. Prominent indices tracking major tech stocks lost nearly 23% last year. Unfortunately, they are likely to lose even more ground in early 2023. Any company valuation gained throughout the COVID-19 pandemic has been wiped out in most cases. As a result, some tech firms now have less tech stock value than before the pandemic began. Recovering those lost gains will prove complicated, if not nearly impossible.
One redeeming factor is the Fed’s interest rate plan for 2023 and beyond. However, they would have to lower the rates to make tech stock more appealing. Unfortunately, it doesn’t appear as if the Fed will change its current approach until late 2023, if not later. Investors are better off looking for alternative investments. Whether those are precious metals or cryptocurrencies is entirely up to them.