Netflix released bad results including a subscriber decline and the stock was crushed. Results this time over at Google/Alphabet were okay if a little below expectations except at the YouTube division, which fared poorly. Facebook may have cheered the market today with their earnings numbers—or maybe the market was looking for a reason to tip upwards after so many losing sessions, since Facebook’s numbers for revenue were actually disappointing.
So what does all of this mean—audience and revenue numbers showing decline or stagnation across Netflix, YouTube, and Facebook?
Very possibly the audience for the new digital platforms has peaked, at least for now. Expanding all over the world and into so many corners of American life allowed hyper-growth for a few companies during the 2010s, as the tech giants performed as one of the best investments of all time. But now, in a maturing industry the growth for companies is more likely to come from taking market share from competitors rather than an expansion of the overall market size.
So what does this mean for stock investors? As the last year has gone on the clear return premium seen from being the in the NASDAQ-100 (via an ETF like the QQQ) over the S&P 500 (via something like the VOO ETF) has disappeared, and maybe that will be the case for a while. The overall tech sector may not return better in the aggregate than the overall stock market in this next decade as it clearly did during the last one.
Picking winners in tech will always be a good (if luck dependent) strategy but the days of just picking tech for an exaggerated part of the portfolio may be over (for now).
Disclosure: Through personal holdings that I control and through investment LLCs in which I am a partner, I buy, hold, and sell stocks, bonds, ETFs, options, NFTs, and cryptocurrencies, not limited to but including some of those discussed in this newsletter.