Beautiful Virgin Islands

Friday, Jul 04, 2025

0:00
0:00

Once Wall Street's stars, Big Tech falls back to Earth

After years of screaming higher, almost regardless of what the economy was doing, tech-oriented stocks are tanking and dragging down the rest of Wall Street. Many of these high-profile companies are still making billions of dollars in profits, and they continue to dominate the top of the rankings for most valuable businesses.
But two big changes have caused their stocks to come sharply back to Earth this year: Interest rates are rising, and expectations for their big continued growth suddenly look much more shaky.

Consider Netflix, whose stock more than tripled between early 2018 and its peak last November. It’s since lost virtually all that gain, dropping by more than two thirds this year alone for the worst loss in the S&P 500 as of Tuesday.

Similarly, Facebook parent Meta Platforms has lost close to half its value this year. Neither company falls into Wall Street’s “technology” classification; they’re instead categorized as “communications services” companies, along with many other internet-related stocks.

But they are both big parts of the Nasdaq composite index, along with such tech heavyweights as Apple and Microsoft. And the Nasdaq is on pace for its worst month since the 2008 financial crisis. Its drop of 20.2% for the year, as of Tuesday, was much worse than the 12.4% fall for the S&P 500 or the 8.5% slip for the Dow Jones Industrial Average, which has less of a tech focus.

The tech stocks in the S&P 500 are down 19.8% for the year through Tuesday, while communications services stocks in the index tumbled even more, 24.1%. The rest of the S&P 500 fell only 6.9%.

Tech-oriented stocks have struggled in large part because interest rates have shot to their highest level in years. The 10-year Treasury yield, for example, topped 2.90% recently after starting the year at 1.51%, though it’s receded in recent days. Yields have surged as the Federal Reserve prepares to raise short-term rates sharply to stamp out high inflation. It’s also planning other moves to push longer-term rates upward.

Higher interest rates are a drag on all kinds of investments. Now that a 10-year Treasury is close to offering a real return for the first time since the pandemic, after taking inflation into account, investors can make money by parking in safe bonds. That makes them less willing to pay high prices for riskier investments. High-growth, tech-oriented stocks are now taking the hardest hits because their prices earlier soared the highest.

Netflix, for example, began 2022 with a stock price trading at 45.6 times its expected earnings per share over the ensuing 12 months. That was more than double what investors were willing to pay for each $1 of expected earnings from the overall S&P 500.

Investors were comfortable paying such high prices for Netflix and tech stocks generally when interest rates were super-low. They also were willing to stretch for stocks of companies that were able to grow strongly, even when the overall economy was hurting.

But now rates are rising and continued growth looks less assured. Netflix recently reported a drop in its number of subscribers for the first three months of the year, for example, with more losses expected in the spring. People have more options for entertainment now that pandemic restrictions are being relaxed.

Google’s parent company Alphabet said Tuesday that its revenue growth last quarter slowed to its lowest pace since 2020. Analysts highlighted slowdowns in search and at YouTube in particular.

Stocks of semiconductor companies have also been big laggards this year, partly on worries that demand for smartphones, personal computers and other hardware will flag after sales exploded during the pandemic. An index of semiconductor stocks has dropped 26.3% this year, a sharp fall after it soared more than 40% for three straight years.
Newsletter

Related Articles

Beautiful Virgin Islands
0:00
0:00
Close
DJI Launches Heavy-Duty Coaxial Quadcopter with 80 kg Lift Capacity
U.S. Senate Approves Major Legislation Dubbed the 'Big Beautiful Bill'
Largest Healthcare Fraud Takedown in U.S. History Announced by DOJ
Poland Implements Border Checks Amid Growing Migration Tensions
Political Dispute Escalates Between Trump and Musk
Emirates Airline Expands Market Share with New $20 Million Campaign
Amazon Reaches Milestone with Deployment of One Millionth Robot
US Senate Votes to Remove AI Regulation Moratorium from Domestic Policy Bill
Yulia Putintseva Calls for Spectator Ejection at Wimbledon Over Safety Concerns
Jury Deliberations in Diddy Trial Yield Partial Verdict in Serious Criminal Charges
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
King Charles Plans Significant Role for Prince Harry in Coronation
Two Chinese Nationals Arrested for Espionage Activities Against U.S. Navy
Amazon Reaches Major Automation Milestone with Over One Million Robots
Extreme Heat Wave Sweeps Across Europe, Hitting Record Temperatures
Meta Announces Formation of Ambitious AI Unit, Meta Superintelligence Labs
Robots Compete in Football Tournament in China Amid Injuries
Trump Administration Considers Withdrawal of Funding for Hospitals Providing Gender Treatment to Minors
Texas Enacts Law Allowing Gold and Silver Transactions
China Unveils Miniature Insect-Like Surveillance Drone
OpenAI Secures Multimillion-Dollar AI Contracts with Pentagon, India, and Grab
Marc Marquez Claims Victory at Dutch Grand Prix Amidst Family Misfortune
Germany Votes to Suspend Family Reunification for Asylum Seekers
Elon Musk Critiques Senate Budget Proposal Over Job Losses and Strategic Risks
Los Angeles Riots ended with Federal Investigations into Funding
Budapest Pride Parade Draws 200,000 Participants Amid Government Ban
Southern Europe Experiences Extreme Heat
Xiaomi's YU7 SUV Launch Garners Record Pre-Orders Amid Market Challenges
Jeff Bezos and Lauren Sanchez's Lavish Wedding in Venice
Russia Launches Largest Air Assault on Ukraine Since Invasion
Education Secretary Announces Overhaul of Complaints System Amid Rising Parental Grievances
Massive Anti-Government Protests Erupt in Belgrade
Trump Ends Trade Talks with Canada Over Digital Services Tax
UK Government Softens Welfare Reform Plans Amid Labour Party Rebellion
Labour Faces Rebellion Over Disability Benefit Reforms Ahead of Key Vote
Jeff Bezos and Lauren Sánchez Host Lavish Wedding in Venice Amid Protests
Trump Asserts Readiness for Further Strikes on Iran Amid Nuclear Tensions
North Korea to Open New Beach Resort to Boost Tourism Economy
UK Labour Party Faces Internal Tensions Over Welfare Reforms
Andrew Cuomo Hints at Potential November Comeback Amid Democratic Primary Results
Curtis Sliwa Champions His Vision for New York City Amid Rising Crime Concerns
Federal Reserve Proposes Changes to Capital Rule Affecting Major Banks
EU TO HUNGARY: LET THEM PRIDE OR PREP FOR SHADE. ORBÁN TO EU: STAY IN YOUR LANE AND FIX YOUR OWN MESS.
Trump Escalates Criticism of Media Over Iran Strike Coverage
Trump Announces Upcoming US-Iran Meeting Amid Controversial Airstrikes
Trump Moves to Reshape Middle East Following Israel-Iran Conflict
Big Four Accounting Firms Fined in Exam Cheating Scandal
NATO Members Agree to 5% Defense Spending Target by 2035
Australia's Star Casino Secures $195 Million Rescue Package Amid Challenges
UK to Enhance Nuclear Capabilities with Acquisition of F-35A Fighter Jets
×