The tech sell-off has accelerated over the past few weeks in 2022, with first-quarter earnings citing challenges such as inflation, supply chain shortages and the war in Ukraine.
For some tech giants, the market downturn is a double whammy. In addition to dealing with its own operating headwinds, it has to face active investors from other companies after the multi-year bull market hit a wall at the end of last year.
Amazon (AMZN-US), Uber (UBER-US), Alphabet (GOOGL-US) and Shopify (SHOP-US) all posted more than $1 billion in equity losses in the first quarter. Add in Snap (SNAP-US), Qualcomm (QCOM-US), Microsoft (MSFT-US), and Oracle (ORCL-US), and tech companies have collectively lost more than $17 billion in equity in the first three months of the year.
Investing that once seemed like genius, especially as high-growth companies line up for massive IPOs, is now running deep red. The Nasdaq fell 9.1% in the first quarter, its worst decline in two years.
The second quarter looked even worse, with the tech-heavy Nasdaq down 13% as of Thursday’s close. Many stocks that have rallied recently have lost more than half their market value in a matter of months.
Businesses use a variety of colorful terms to describe their investment losses. Some call it non-operating expense or unrealized loss, while others use terms like revaluation and fair value change. Whatever the language, for the first time in more than a decade, tech companies have been reminded that investing in peers is a risky business.
The latest losses came from Uber and Shopify, both of which reported first-quarter results this week.
Uber said Wednesday that $5.6 billion of its $5.9 billion loss in the quarter came from its stakes in Southeast Asian mobility and delivery company Grab, self-driving car company Aurora and Chinese ride-hailing giant Didi (DIDI-US). holdings.
Uber initially acquired stakes in Grab and Didi by selling its local operations to these companies. The deals appear to be lucrative for Uber as private valuations soar. But Didi and Grab’s shares have plummeted since listing in the U.S. last year.
Shopify reported a $1.6 billion investment loss on Thursday (5th). Much of that came from online lender Affirm, which also went public last year.
Shopify acquired a stake in Affirm (AFRM-US) through a partnership formed in July 2020. Under the agreement, Affirm became the exclusive provider of point-of-sale financing for Shop Pay, and Shopify received warrants for up to 20.3 million shares.
Affirm shares are down more than 80% from their November highs, leaving Shopify with a steep loss for the quarter. But with Affirm trading at $27.02, Shopify’s original investment is still up sharply.
Amazon was the tech company hit hardest by investments this quarter. The e-commerce giant disclosed last week that its stake in electric vehicle company Rivian (RIVN-US) lost $7.6 billion.
Following its IPO in November, Rivian’s shares plunged nearly 50% in the first three months of 2022. Amazon is investing more than $1.3 billion in Rivian as part of a strategic partnership with the EV company, which aims to produce 100,000 delivery vans by 2030.