The past six months have been a rough ride for US tech stocks. Since the tech-heavy Nasdaq Composite index hit a record high in November 2021, many US mega-cap shares have plunged. But is this the beginning of a long decline in tech stocks, or is the damage mostly done?
The rise and fall of tech stocks
The past five years have been great for tech stocks. Since 5 May 2017, the Nasdaq Composite has more than doubled, rising 111%. Adding five years of dividends takes this return above 115%.
However, the Nasdaq Composite has taken a beating since peaking at a record high of 16,212.23 points on 22 November 2021. As I write, it stands at 12,871.53, down 3,340.7 points from its peak. This leaves the index down more than a fifth (-20.6%) from its pinnacle, putting it into bear-market territory. Here’s how this index of tech stocks has performed over six recent timescales:
| One day | 3.1% |
| Five days | -2.3% |
| One month | -12.0% |
| Year to date | -17.7% |
| Six months | -17.0% |
| One year | -8.6% |
Note the index has fallen over five of these six periods, barring a 3.1% leap yesterday. So, are tech stocks now yesterday’s stars, or will they recover and rebound?
Hey MAMAA
Jim Cramer, popular host of US show Mad Money, uses the acronym MAMAA to describe the five biggest tech stocks by market cap. These are Meta (owner of Facebook), Apple, Microsoft, Amazon and Alphabet (parent of Google). Here’s how these mega-cap tech stocks have performed since peaking in 2021:
| Company | All-time high | Current price | Loss | Loss (%) | Bear stock? |
| Meta | $384.33 | $205.73 | $178.60 | -46.5% | Yes |
| Apple | $182.94 | $163.64 | $19.30 | -10.5% | — |
| Microsoft | $349.67 | $289.63 | $60.04 | -17.2% | — |
| Amazon | $3,773.08 | $2,891.93 | $881.15 | -23.4% | Yes |
| Alphabet | $3,030.93 | $2,370.45 | $660.48 | -21.8% | Yes |
As you can see, declines across these five mega-cap tech stocks range from 10.5% at consumer-products giant Apple to a hefty 46.5% at Meta. Of these five top shares, three are in a bear market, having fallen 20%+ from their record highs. Ouch.
Which stocks would I buy today?
If my only choice today were to buy all five of these tech stocks or none, then I would reluctantly buy all five shares. However, given the choice, I would turn down two of these Nasdaq giants.
The first company I would reject would be Meta. Even after a huge 17.6% surge yesterday, Meta shares trade on a lowly price-to-earnings ratio of below 15.6 and an earnings yield of 6.4%. Facebook, once the Goliath of social media remains a major force. But it’s rapidly losing out to faster-growing platforms such as TikTok and YouTube. I recently asked my late-teens daughter and her friends about Facebook. Their universal reply was along the lines of: “FB is for grandparents, we use TikTok and Snapchat”.
The second of these tech stocks that I’d reject would be Amazon. Though I admire the world’s largest e-tailer and it likely has a strong future ahead of it, the shares trade on over 44.6 times earnings. Also, they’re set to lose $250 at today’s open, following disappointing results. Yikes.
In summary, though US tech stocks have taken a beating since late 2021, I suspect that the damage has largely been done — for the wider market, at least. But individual shares could still have further to fall, so careful stock-picking is key for me, as always!
