Tech sector stocks continue to be hit hard this month, now led by Apple (Apple Stock Quote, Chart NASDAQ:APPL) whose share price tumbled on Monday after indications arose of a slowdown in demand for its products including the iconic iPhone. The malaise shouldn’t come as a surprise, says Recode founder and editor-at-large Kara Swisher who argues that with no groundbreaking innovations in sight the sector looks to be entering a fallow period.
Apple shares fell by five per cent on Monday as news surfaced that some of its suppliers including face ID tech company Lumentum Holdings cut their revenue forecasts, suggesting a slowdown in Apple’s product sales. JPMorgan Chase & Co slashed their price target for APPL by $4 to $266 (all figures in US dollars).
The rest of the FAANG group of US stocks hasn’t fared any better. Amazon now sits 20 per cent off its recent high set in early September while Google parent Alphabet is down 18 per cent from its high of late July.
Did you buy the latest iPhone? I didn’t…
“Apple had such a run-up, so I’m not so surprised that there’s been a pullback, especially when it’s not clear what products are next,” says Swisher, in conversation with CNBC. “For example, did you buy the latest iPhone? I didn’t. I kept the current one I have. And so I think it’s a question of them having exciting new products going forward, and in that interim period, there’s going to be a sell-off given how much it has run up.”
“Overall in tech, we’re sort of in a fallow period right now and there are a lot of negatives and not so many positives to look forward to and so I’m not surprised,” she says. “We’re in a period of not so much innovation, and so the question is what’s the next platform, the next giant growth spurt? Mobile has been going on a long time now and I think everybody is now searching for what’s next.”
The current value of the FAANG stocks in comparison to the rest of the US indices shows how impactful the fortunes of companies like Apple and Facebook can be. By August of this year, the FAANG stocks along with Microsoft Corp. accounted for 38 per cent of the year-to-date gains on the S&P 500. Yesterday, on the back of share price declines for Apple and Goldman Sachs Group, the S&P 500 dropped 54.79 points or 1.97 per cent while the Nasdaq Composite fell 206.03 points or 2.78 per cent.
Swisher says that the size and power of the top tech stocks is evident in how difficult it is for smaller companies to scale up while remaining independent of the tech giants.
“With some of these companies, they’re like semi-trailers running down the highway where nobody can get by, and the only way to get by is to get bought, and so I think you’re going to see a lot more purchasing,” she says.
“You have to wonder where the big growth opportunities for Apple are going to come from. I think what’s more exciting is what’s going on with companies like Amazon or Uber, even, because even though there are questions around its valuation, around that $120-billion figure, directionally it’s the correct way.”