Tech stocks earned a much-needed boost this month in the wake of the chaos that overtook the U.S. banking industry. Some are up as high as 14 percent, while some bank stocks are down 12 percent.
Many of the biggest tech companies in the U.S.—including Microsoft, Google and Amazon—saw their stock prices peak in 2021 and drop in 2022. That year, tech stocks fell more than 30 percent, which was higher than the overall market decline of 20 percent, according to Forbes. Macroeconomic conditions like increased inflation and a slowed advertising market impacted tech companies uniquely, as many rely on advertising dollars to earn revenue.
Tech companies aren’t out of the woods yet, however. While inflation cooled to 6 percent last month—down from its high of 9.1 percent last June—it is still triple the pre-pandemic level. Media investment companies like Magna Global and GroupM predict the ad market will continue to slow this year, which could further impact tech stocks.
Gains in tech tracked losses in banking
As turmoil in the banking industry caused many shareholders to pull their money from bank stocks, tech stocks immediately shot up.
The Federal Deposit Insurance Corporation closed Silicon Valley Bank (SVB) following a bank run on March 10, which seemed to spark the tech stock increase. Stocks for five of the biggest U.S. tech companies—Google, Microsoft, Apple, Meta and Amazon—all climbed beginning March 10. They are up today (March 29) between 7 and 14 percent from the SVB closure. Out of these companies, Meta experienced the highest growth of 14 percent to $204 per share.
Bank stocks started falling the week prior to SVB’s collapse, coinciding with the closure of Silvergate Bank on March 3. Its holding company shut down the bank following investigations from federal and state regulators. In the same period tech stocks rose, stocks from some of the biggest U.S. banks—Bank of America, Citigroup, Wells Fargo, JPMorgan Chase and U.S. Bancorp—fell between 3 and 12 percent.
Are tech stocks a good buy?
The approaching earnings season could further drive tech stocks up, according to analysts at Wedbush, a Los Angeles-based investment firm.
Amid an uncertain market, tech stocks have become the newest “safety trade,” and Big Tech is the largest beneficiary, analysts said in a report. Big Tech companies have undergone massive cuts in recent months, which can send stock prices soaring. Since January, Amazon has announced layoffs impacting 27,000 employees. Meta and Microsoft are laying off 10,000 each, and Google is cutting 12,000 workers. These companies also have huge cash reserves, positioning them well in the market, the analysts said. “We also believe the stage is set for a massive (mergers and acquisitions) spree in tech,” they said.