Some of the Tech Magic Is Gone

The bubble hasn’t exactly burst, but we’re no longer seeing a fantastical belief in the power of technology.

At this point in 2021, technology was eating the world and stock markets.

Right now … ehhh, not so much.

A Nasdaq index of about 100 tech stocks has dropped 14 percent from the end of December, significantly more than the declines for collections of U.S. stocks that are not as tech heavy. Tech superstars including Facebook, Alibaba and Tesla have slipped down the ranks of the world’s most valuable companies.

More governments are trying to control how tech companies operate. Some tech investors and observers are beginning to ask if a decade-long boom in start-ups is losing steam, and for real this time. Cryptocurrencies should be having their moment but instead are falling in price. Initial public offerings are mostly on hiatus.

At multiple points in the past decade, many people (including me) have asked if the tech bubble is over, and they’ve been mostly wrong. I’m not going to predict the future but instead try to assess this moment for technology. Some odd things are happening.

Right now, a bit of faith in the ever-upward march of technology seems to have evaporated. It’s not exactly a bursting bubble. It’s more like a (perhaps temporary) shortage of belief in the great magic of technology.

So what is going on?

Look, the world is mobilizing to stop the invasion in Ukraine, the coronavirus pandemic is continuing into its third year and governments are trying to tamp down climbing consumer prices. Those forces and other unsettling events are making investors consider more carefully where they put their money, and in some cases tech companies, start-ups or Bitcoin don’t feel like good bets anymore.

Prior tech freakouts, including during the early months of the pandemic, proved temporary and this one could, too. But again, something does feel different this time. Maybe.

Every other day, some tech company whispers that its sales won’t grow to infinity, and its stock price falls into a crater. Zoom Video Communications, one of the tech companies that proved essential earlier in the pandemic with a soaring share price to match, has now fallen back to its February 2020 stock price.

That is a potent symbol. People with money are saying no right now to buying stock on the hopes of blockbuster sales years into the future. That’s a root cause, too, for a loss of faith in recently public companies including the stock trading app Robinhood, the upstart electric vehicle company Rivian and the Chinese on-demand ride start-up Didi.

Dan Ives, a tech investment analyst with the firm Wedbush Securities, told me that he believed the world’s digital transformation was just getting started and that technology companies would continue to grow larger and stronger.

But he said that investors were rethinking the ability of some young companies to keep growing at the rate they did a year or two ago. In some corners, Ives said, “the froth has clearly come off the tech market.”

Waning optimism is hitting young tech companies that are just getting started. The prices investors are paying for start-ups at early stages of development hit a peak in the second half of 2021, according to a recent financial presentation from the start-up investment firm Redpoint Ventures.

Dan Primack, a journalist at Axios, said two months ago that the “go-go era is history” for tech start-ups and other types of young companies.

Primack knows that similar predictions have been off base repeatedly, but he cited evidence that investors were no longer throwing cash at anyone who says the word “innovation.” Being reckless or even financially irrational has paid off for investors in start-ups for a long time, and Primack’s point was that the riches were no longer as great as they used to be.

Again, all this could prove a blip, and tech could continue to add both wealth and importance. I also know that not many of you are shedding tears over cratered stock prices for Facebook and Netflix. Fair. A blind faith in technology isn’t great for us, but the belief in technology has also been beneficial.

That optimism in technology has given companies the cash and freedom to bring us zippy laptops, Doritos delivered in 15 minutes and more options to work away from an office. If and when the tech party becomes less lavish, the changes that we’ve taken as a given may disappear, in ways that may be both potentially disruptive and healthy. We’ll see.

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