On Friday, January 21, 2022, monitors display stock market data at the Nasdaq Market site in New York.
Michael Nagel | Bloomberg | Getty Images
Top CEOs and investors have hit an optimistic tone on recently sold global technology stocks, telling CNBC that it is unlikely to metastasize to a broader market crisis.
The tech-heavy Nasdaq 100 index closed down more than 26% year-to-date on Monday and earlier this month – after the Federal Reserve raised interest rates – the world’s largest tech companies lost $ 1 trillion in just three trading sessions.
Tech and growth stocks have been hit hard by the prospect of higher rates, as the Fed and other major central banks seek to rein in rising inflation by tightening monetary policy.
The sudden downturn in high-growth technology stocks – which is seen as an overvaluation of the market at the end of 2021 – has raised concerns among some commentators about a technology-driven crash like the “dotcom bubble” burst in 1999/2000.
“Obviously there is a question as to what the exact market value of these few models should be, but the underlying business models are the true business models – not just for now, but for the future, in terms of service delivery, advice and what you have digitally.” Ralph Hammers told CNBC.
“It’s a trend that is supported by the population and accelerated by client behavioral changes. So whether it’s in consumer services or financial services or whatever, I think technology business models, which are digital, are still right because those are the real business models.” “
While some analysts have suggested that sentiment towards the technology sector is at its worst since the dot-com bubble, as rising rates force companies to make quick profits, they also point out that long-term opportunities for investors still exist.
“It’s not like 20 years ago [the dotcom bubble]. We had some models that were paper models and not real, “Hammers added.” Over the last 20 years, we’ve been able to show that real change is happening in retail, financial business, etc., and that trend is going to stop because of what we’re seeing now. No. “
His remarks echoed Credit Suisse chairman Axel Lehmann on Monday, who told CNBC that investors should maintain a long-term outlook despite the temporary “shake-out” of technology stocks, as many companies in the sector are still “tough and strong”. “
“The level of valuation has come down, basically, in all stock markets, but the profits are still there for the companies, so we’re seeing a bit of a jolt in what’s happening,” Lehmann said, noting that there were similarities. Dotcom bubble, the underlying trend is now even more helpful.
“A lot of companies will probably disappear, but we shouldn’t assume that there will be fundamental trends [not] Still, the technology and digitization that will be important, the new business model – this is the key theme that we as business leaders need to be very aware of. ”
Close a ‘significantly more orderly’ sale
The US Federal Reserve says it will not hesitate to raise interest rates until inflation reaches a healthy level, and its sharp pivot in the face of global price increases has, in part, driven expulsion from technology stocks.
However, David Rubenstein, a billionaire investor and co-founder of private equity firm Carlyle Group, said on Monday that markets were “overly responsive” despite efforts to meet Fed expectations.
“During the crash of 1999, 2000, 2001, you had internet companies that had no income, obviously no income. In some cases they had nothing but business plans, and those companies should not have gone public. Rubenstein told a WEF panel chaired by CNBC.
“Now, you get a company like Netflix that has 250 million subscribers. It may not be worth what it was on the market a few months ago, but it is definitely more valuable to me than what it is doing now.”
Rubenstein added that when the markets “show an additional response” – as it were – there is an opportunity for investors to go there and “buy from the bottom”.
Netflix stocks have plunged nearly 69% year-over-year, while affiliate technology Titan Amazon has plunged more than 35%.
“Many of these companies whose value has recently declined are still great companies, and perhaps the market has over-reacted to the price. I think there’s been some great buying, I don’t think that’s where we were in 1999/2000.”
Despite the sharp decline so far this year, Citigroup CEO Jane Fraser noted during a panel in Davos on Monday that the sell-off from the Wall Street Bank’s perspective has been “significantly streamlined” among investors in the United States.
“The way they couldn’t go door-to-door with the global financial crisis when that crashed, and where we were in 2020. We’ve seen a fairly systematic takedown and change in resource allocation,” Fraser said.
He highlighted that fixed income issues remained “fairly constructive” in both the corporate and sovereign sectors, and market indicators show that the recent recession is more likely to be a “necessary correction” than a wholesale crash.
“There’s not so much strain yet – we’ve seen it in some products, we’ve seen some in high yields – but it’s not a disaster that can happen,” he concluded.
High growth, high frustration
According to Maurice Levy, chairman of the board of the French advertising giant Publicis Group, this year’s valuation has declined so quickly and rapidly due to the rate of profit growth in the technology sector in recent years. He said companies have fraudulently set the bar for high-income seasons.
“It’s a sector that is growing by 30% to 50% and when they are only growing by 25% or 15%, there is a frustration and then you see the stock sinking. So, we should not take that sector as one. Barometers because the expectations in technology are very high, “Levy told CNBC.
“We need to be relatively calm when we look at those numbers and with a long view. For now, when you look at telecoms and you look at all the people who invest in advertising, the numbers are still pretty good.”