Monday, June 5Welcome

The Tech Sector Weakness Will Continue Through 2023

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Wednesday, December 14, 2022

Big Tech’s pain doesn’t end at midnight on New Year’s Eve

As the year draws to a close, the final days of 2022 cannot come quickly for Big Tech. Over the last 12 months, an industry that was euphoric with companies like Apple (AAPL) posting record earnings turned bleak as companies like Meta (META) were forced to lay off workers. I got into a situation.

From supply chain bottlenecks that have slowed Apple’s ability to keep up with iPhone demand, to the Federal Trade Commission’s (FTC) attempt to block Microsoft’s (MSFT) $69 billion Activision Blizzard (ATVI) deal. 2022 was a difficult year until Amazon (AMZN) cut jobs. year of the tech industry.

“I think 2022 has been an extreme year for tech businesses,” Bob O’Donnell, president and chief analyst at TECHnalysis Research, told Yahoo Finance. “The very high valuation of tech companies and, unfortunately, what was a near-invincible feeling at the beginning of the year was almost the exact opposite by the end of the year as the post-pandemic economic realities began to set in. ”

And those trends aren’t likely to change anytime soon.

It’s not just an economic issue. Big tech companies continue to battle antitrust investigations and lawsuits, as well as new threats to Section 230 of the Communications Decency Act, the shield of responsibility that protects companies that host and moderate online user-generated content.

File - Facebook CEO Mark Zuckerberg speaks at Georgetown University in Washington, Thursday, October 17, 2019. He said in a letter to employees Wednesday.  (AP Photo/Nick Wass, File)

Meta CEO Mark Zuckerberg laid off more than 11,000 employees in 2022. (AP Photo/Nick Wass, File)

However, 2023 will not be a complete loss. And with macroeconomic headwinds likely to turn around, the industry giants could wrap things up by the middle of this year.

new year, same problem

Mass layoffs at companies like Meta, Snap (SNAP), and HP (HPE) disrupted the tech industry in 2022, but more pain could be in store in the near future.

“I think 2023 will continue to be a bit of a downsizing for some organizations, but I think it will settle down after that,” O’Donnell explained.

Companies across the tech sector are also implementing hiring freezes, which will last until the new year. In November, Amazon (AMZN), which cut 10,000 employees, said it would suspend hiring additional companies, a move that is expected to last for months.

Beyond layoffs and hiring freezes, the slowdown in digital ad sales that has burned out Google’s YouTube, Meta and more is expected to continue in 2023. A whopping $400 million.

Meanwhile, Meta and Snap are coping with both slowing ad sales and the ongoing impact of Apple’s iOS privacy changes. These companies are compromised in their ability to track user activity across the web.

In the third quarter, Meta announced that it expects fourth quarter revenue to be between $30 billion and $32.5 billion. Wall Street expected him to make $32.2 billion. All of this stems from Meta continuing to pour billions of dollars into its Metaverse efforts.

File - In this December 5, 2019 file photo, AWS CEO Andy Jassy discusses new initiatives with the NFL at AWS re:Invent 2019 in Las Vegas.  Amazon announced on Tuesday, February 2, 2021 that Jeff Bezos will step down as his CEO later this year, leaving the company for the first time since founding the company nearly 30 years ago. Bezos will be replaced by Jussie, who will run his business on Amazon's Cloud, in the summer, according to Amazon.  (Isaac Brekken/AP Images for NFL, files)

Amazon CEO Andy Jassy cut 10,000 jobs in 2022. (Isaac Brekken/AP Images for NFL, File)

If that’s not enough, tech companies also have to contend with antitrust investigations and the ongoing battle over Section 230 of the Communications Decency Act. Google is currently filing a lawsuit related to its search dominance. Meta, meanwhile, is at war with the FTC, which he wants to dismantle the social media giant.

Meanwhile, Microsoft is looking to acquire Activision Blizzard for $69 billion, but must win an FTC lawsuit to block the deal. The tech giant is still waiting for EU and UK competition regulators to intervene in the deal, and we may have more information in early 2023.

Then there is Section 230. In 2023, the Supreme Court will hear challenges to the law, setting the biggest test yet.

Gonzalez v. Google case could hold Google’s YouTube accountable for violating anti-terrorism laws because Google’s YouTube algorithm suggested user-generated terrorist videos to other users It has to do with whether The family of an American killed in a terrorist attack in France says Google should be stripped of its Section 230 protections after its algorithms recommended videos that helped radicalize the terrorist who killed his daughter. claim.

If the court rules in Gonzales’ favor, it could trigger a complete overhaul of how and when technology companies use algorithms to recommend user-generated content.

On Tuesday, December 11, 2018, on Capitol Hill in Washington, Google CEO Sundar Pichai appeared before the House Judiciary Committee to be questioned about the internet giant's privacy security and data collection. Pichai said he angered members of the Senate panel in September. Manipulating online services that influence US political elections by declining their invitations to testify against foreign governments.  (AP Photo/J. Scott Applewhite)

Alphabet CEO Sundar Pichai aims to improve the company’s efficiency to save cash. (AP Photo/J. Scott Applewhite)

“I think that’s the biggest uncertainty in 2023,” NYU Stern Business School professor Vasant Dhar told Yahoo Finance. ” [Gonzalez v. Google] Cases are very important as they are central to the business model of the social media platform,” he added.

hope on the horizon

Despite the dire situation, 2023 has good news for tech companies. According to Wedbush analyst Dan Ives, the onslaught of negative economic news should slow in the second half of the year. Additionally, software and cybersecurity should see solid growth in the new year.

“I think [tech] Underowned as we have seen [it] For equities, we go all the way back to 2009,” says Ives. “I think we’re facing technical woes seven and eight. From Apple to he Microsoft to Meta to Google, I think 2023 will be a relatively strong year for these stocks.”

So while the tech industry may still face challenges in the coming months, at least the worst has already been done, and we’re seeing a turnaround…eventually.

To Daniel Howley, technical editor at Yahoo Finance.follow him @Daniel Howley

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