In the last year, Alphabet, Microsoft, Amazon and other technology companies have laid off more than 70,000 workers. Announcements of job cuts have multiplied in January: Amazon (18,000), Alphabet (12,000), Microsoft (10,000), Meta (11,000), Salesforce (7,000), Tesla (6,000) and Twitter (3,700). The fall in digital advertising and lower consumption is the quick explanation of its executives. But there are eight reasons to argue that the tech crisis will last until 2024.
The global geopolitical and macroeconomic context is the first. At the World Economic Forum in Davos, business and political leaders highlighted the energy crisis, the war in Ukraine, the very high inflation, the slowdown in the international economy and the Covid in the face of the reopening of China as their top concerns.
The second is that the energy crisis and the war in Ukraine deal a heavy blow to technology companies. The commitment of the Western coalition to send more weapons to Ukraine is strengthened. War is raised as a defense of democracy. Thus the possibility of a negotiation with Moscow from a position of strength is removed. Vladimir Putin prepares an offensive with part of the 300,000 mobilized reservists. It will only cause more fatalities. The demoralized and poorly equipped Russian soldiers will continue to fight a useless battle against the superior Western weaponry: Himars mobile artillery, Bradley and Stryker armored vehicles, Patriot anti-aircraft batteries and Leopard tanks from European countries whose shipment Germany will end up authorizing because 46% of its population will. support,
Joe Biden’s Green New Deal and the Democratic Party and the EU’s European Green Deal are in competition with each other. They are colliding with the reality of a winter during which only good storage of natural gas and oil in Europe has so far prevented supply outages. Biden forgot his promise of 500,000 electric vehicle charging stations by 2030. But the 137% increase in shipments of liquefied natural gas (LNG) from the US to Europe in 2022 is real, more than half of imported LNG for Europe.
Third, the actual war in Europe and global geopolitical tension limit private investment in the few manufacturers of the most powerful semiconductors (sub-2 nanometers), such as TSMC, Samsung and Intel. They need stable production and distribution chains for their semiconductors, which were already failing before the outbreak of Covid. The $52 billion public funding included in the US Chips Act and similar initiatives will be distributed very gradually.
The actions of central banks is the fourth cause. The Fed, the ECB and other Western central banks will continue to raise rates until inflation is tamed. It has been reduced in the US to 6.5% in December 2022, in year-on-year terms. But the Fed does not foresee that it will approach 2% until 2024. The capital that investors ask for to sustain the technological bubble will not come. The one from the metaverse has already burst. A three-dimensional virtual ecosystem is a bad idea. Between March 2000 and October 2002, the Nasdaq plummeted from 5,048 to 1,139 points, destroying almost all of its accumulated gain since 1995. On January 2, 2020, it was at 8,972 points, and closed yesterday at 11,140 points. The current price to earnings ratio of the Nasdaq, of 27, is clearly higher than that of 22, in January 2020, and that of 13, at the end of 2009.
Fifth, the Republican majority in the House despises Silicon Valley. The Biden administration and the EU maintain their plans to further regulate the technological giants. The combined stock price of Apple (2.2 trillion dollars), Microsoft (1.8 trillion), Alphabet (1.3 trillion) and Amazon (0.9 trillion) has fallen substantially, to 6.2 trillion. Only the US, with 25 trillion GDP, and China with 18 trillion, which grew only 3% in 2022, exceed them. But the fines applied and investigations launched on both sides of the Atlantic for anti-competitive practices are an irreversible trend in the EU in the post-European digital rights regulation era.
The sixth cause is the hacks of maximum historical dimension. The stoppage for a few days of the 8,800 km Colonial Pipeline gas pipeline in the US or the penetration of Russian and Chinese intelligence into the Texas technology company SolarWinds are two prominent examples. SolarWinds supplies the Orion operating system to thousands of companies in the US and five other countries. VPNs that SMBs and individuals can afford can easily be overwhelmed. They combine antivirus with data protection and add layers of protection like two-factor authentication. But the IP address of any computer, laptop, tablet or mobile should be changed every 0.0 seconds and to prevent hackers from penetrating it. Real-time maps displayed on public websites show the origin (Russia and China) and destination (Europe and the US) of medium volume hacks. But Putin wants to be respected and China to continue selling its products and services. Consequently, they will not attack Western critical infrastructures.
The seventh cause is that very well-informed people no longer show interest in appearing on social networks. Cyber attacks, hacks, the dark web, and bots are a dangerous combination. The eighth is that the populist elites have always distracted the general public with spectacle. But the thousands of TVE channels and tens of thousands of accumulated films and television series are not being seen by enough subscribers. The general public does not return to the cinemas either.
Democracy does not advance in the world. But the implicit obedience in dictatorships slows down their technological development. Two years await us during which the prudent citizen must follow the information coverage provided by the rigorous media.
Alexandre Müns He is a professor at EAE Business School
