Concern has been deepening about the future of tech sector stocks like the favoured FAANG group, who have all suffered serious downturns over the past month and a half. And with Amazon, Apple, Facebook and the like already featuring heavily in investment portfolios big and small —and with general market gains and losses tied to the welfare of the FAANGs— it’s no wonder the tech malaise is causing worry.
But tech isn’t dead yet, says venture capitalist Bruce Croxon, in fact, the current selloff should be fairly short-lived.
Tech stocks rebounded slightly in trading on Wednesday, with Amazon, Google, Facebook and Apple all up. The overall picture is less than rosy, however, as all of the FAANG stocks now sit more than 20 per cent off their early October values, bringing down the S&P 500 and NASDAQ indices in the process. Trade wars, regulatory pressures and lowered revenue projections are reportedly all pieces of the puzzle, along with general profit-taking by investors who have done well by the high-flying tech stocks in recent years.
But Croxon, co-founder of the tech-oriented Round 13 Capital, says that the slowdown has so far had no impact on the private side of investing in the sector, nor does he imagine it will.
“I see it as a relatively short-term blip,” says Croxon, on BNN Bloomberg’s The Disruptors, “and what I find interesting is that I think there’s a story within a story on all of these stocks. They’ve conveniently grouped them together as FAANG and they’ve had a great run together. But with Facebook, there’s a story unto itself. When I think about Amazon I think that they’re very well-positioned to handle a downturn because of how diversified they are — you’re not going to cash in your Prime membership, right? Apple, they trade on earnings, and when things tighten up are you willing to pay extra for an iPhone? Maybe not, so maybe the adjustment is justified there.”
Croxon says that while regulatory fears may be justified in the sense that governments are likely to put tighter frameworks around how companies like Facebook and Google operate, there is little chance of that significantly impacting their bottom lines.
“I think there is a small but very vocal group of people who are enlightened and are very aware of the impact that social media is having on things but I don’t see that behaviour resulting in any less ad dollars going into Facebook,” he says. “I see a slight slowdown in the growth of their users, but as long as companies have to make their quarter and they have to reach people [social media advertising] remains the most effective way to do so.”
“The threat of regulation is going to put a damper on stocks, for sure, but if anybody thinks that Google, Facebook, Amazon are going to face a long-term negative impact by any of the short-term rumblings, I think they’re fooling themselves,” Croxon says.