Fired workers in Silicon Valley panic sell their startup stocks as valuations plummet – here are 3 top tech stocks for 2023 that are actually making money
The economic crisis is in full swing.
After nearly a decade of six-figure salaries, cushy jobs, and extravagant office perks, Silicon Valley firms are finally cutting back. In 2022 alone, almost 90,000 technicians were laid off. This year doesn’t start well either. Amazon announced on January 5 that it would cut 18,000 jobs.
Do not miss
And now, SEC filings show Microsoft plans to lay off 10,000 employees by the end of the third quarter.
Things are not looking much better for those who (so far) have avoided layoffs. Countless private and public technology companies have watched their valuations fall over the past 12 months.
And now the Financial Times is reporting that a number of panic-stricken workers are “flooding” the secondary markets with their stocks from their former companies. That means those valuations are likely to fall even further.
Here’s what that could mean for your portfolio — and where you might want to head.
Tech takes a fall
Record low interest rates over the past decade have prompted more investors to seek out risky assets. Losing technology companies were perhaps the riskiest place for this excess cash. Tech valuations have skyrocketed since 2020, allowing startups and tech giants to use their inflated stocks to retain talent.
Tech employees were paid excessive amounts in stock-based compensation. In fact, some companies like Snap and Pinterest paid up to 46% of their total compensation in the form of stock options. This pushed up overall compensation for tech workers during the boom, but is now having the opposite effect as valuations plummet.
The story goes on
Invesco QQQ Trust (NASDAQ:QQQ) — a fund that tracks technology stocks — is down 22.7% over the past 12 months. In the meantime, the valuation of private companies has also collapsed by up to 80%. According to a recent Financial Times report, employees at these firms are rushing to make money in the secondary markets.
Companies struggling for profits have been the biggest losers so far. An index of loss-making companies compiled by Morgan Staney has fallen 54% over the past year. Valuations for many of these companies that are losing money have settled at pre-pandemic levels.
Looking ahead, some experts believe valuations will not recover until the Federal Reserve changes its interest rate strategy. Lower or stable interest rates could make risky tech stocks more attractive. According to interest rate swaps, however, this will not be the case until the end of 2023 at the earliest.
Until then, investors should probably focus on highly profitable tech companies that have been unfairly penalized in this crash.
Adobe
Adobe (NASDAQ:ADBE) has lost 31% of its value over the past year. The company lagged far behind the broader market. However, the underlying business is still thriving.
The company reported revenue of $17.61 billion for fiscal 2022 — up 12% year over year. And in September, the company acquired the Figma design platform, which expands Adobe’s suite of essential designer tools.
The company is also participating in the upcoming artificial intelligence boom by tracking the way its users use key tools and integrating OpenAI’s tools into Figma.
The stock is trading at a price-to-earnings ratio of 33.9.
CONTINUE READING: 4 Easy Ways To Protect Your Money From White-Hot Inflation (Without Being A Stock Market Genius)
Microsoft
Microsoft (NASDAQ:MSFT) is also getting involved in the AI boom. The company was an early investor in OpenAI and now has access to ChatGPT for its Bing search engine. The integration could be complete by early this year, meaning the online search market is on the brink of disruption.
But none of that is reflected in the stock price. Microsoft has lost 21% of its value over the past year. It now trades at just 24.5 times net earnings per share.
Apple
The most profitable tech company in the world certainly deserves a mention on this list. Apple (NASDAQ:AAPL) posted earnings per share of $6.11 for the most recent quarter — up 9% year over year. This year, the company is expected to launch a new virtual reality headset and continue its supply chain migration from China to India.
Apple stock is trading at 21 times earnings, making it an ideal target for investors in 2023.
What to read next
This article is informational only and should not be construed as advice. It is provided without any guarantee.