Tech Stocks Have Taken A Beating This Year, And The Effects Have Been Far-Reaching

After many years of flying high, mighty tech stocks have come tumbling down because of regulatory worries and slow growth. Their bad year affects companies that seemingly have nothing to do with tech.

MARY LOUISE KELLY, HOST:

All this month, we've taken stock of the wake-up call the tech world got in 2018. With privacy scandals, political fallout from those scandals and tech addiction fears, there was a financial cost to all of those companies, such as Facebook and Apple - have seen the value of their shares drop precipitously. That helped make 2018 the worst year for the stock market since the Great Recession.

Well, let's bring in NPR's Jim Zarroli to talk more about this. Hey, Jim.

JIM ZARROLI, BYLINE: Hi, Mary Louise.

KELLY: How big a slice of the market are tech stocks right now?

ZARROLI: Oh, they make up a huge part of the overall trading volume of the market every day. There's been this kind of sky's-the-limit mentality to tech. Tech companies are seen as the companies of the future, and they helped drive the value of other stocks. So even if people don't know it, they make up a huge part of most people's retirement funds, 401(k)s. They're so important that Wall Street actually has an acronym to refer to them collectively, and that is FAANG - Facebook, Apple, Amazon, Netflix and Google.

KELLY: The five big companies of FAANG, and when we talk about these companies and I say that their share prices fell precipitously, how precipitously? How big a decline have they seen?

ZARROLI: Well, the market as a whole has been down, especially since October, which has to do with a number of factors, like slowing growth overseas and interest rates going up. And tech stocks have been swept up in that. Apple and Facebook are down more than 20 percent since the start of October, which is sizable. By November, the overall value of FAANG stocks was down a trillion dollars, which is bigger than the economies of the Netherlands or Sweden.

KELLY: Bigger than the economies of an entire country. And are these tech stocks down because, as you mentioned, the whole market is down? Or is there something specific going on with tech?

ZARROLI: I think the answer is both. I mean, they are affected by overall economic conditions, of course. But there have been larger questions about the tech giants that sort of relate to their place in society. Facebook, for instance, has had to deal with a lot of negative publicity about a lot of things, and the company's user growth has slowed. Google has had to face a backlash from employees over sexual harassment complaints. Apple has seen a different set of problems concerning sales of the latest iPhone - have been disappointing. And Apple is just a huge company, so when that happens, it affects a lot of other companies. And that sweeps through the tech sector as a whole.

KELLY: And as we look ahead into 2019, are there signs that the tech stock boom has ended, or is this a blip?

ZARROLI: You know, it's hard to say because this is tied up with a lot of other factors that are harder to quantify, like the trade tensions between the U.S. and other countries. This is hugely important to tech companies because they do so much business abroad. Apple, in particular, has had a lot at stake in the dispute with China. But one thing is really clear, and that is that the regulatory environment for tech is changing. Here was Apple CEO Tim Cook talking about it on HBO recently.

(SOUNDBITE OF TV SHOW, "AXIOS ON HBO")

TIM COOK: I am not a big fan of regulation. I'm a big believer in the free market. But we have to admit when the free market's not working. And it hasn't worked here.

ZARROLI: So regulators are starting to become alarmed about things like the amount of personal data that these companies collect about people and - and the powerful role they play in society. So times are changing for tech, and that's having an effect on stock prices.

KELLY: Thank you, Jim.

ZARROLI: You're welcome.

KELLY: That's NPR's Jim Zarroli.

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