Pardon the uninitiated; what’s FAANG about?

Expanded, it stands for Facebook, Apple, Amazon, Netflix and Alphabet. The FAANG stocks are the most popular and, arguably, best performing technology stocks in the world. They are traded on the Nasdaq in the US. The FAANGs have earned a name for the bounty they have returned to their investors. Experts say the performance of Nasdaq, which maps the performance of over 3,000 stocks (tech and others), reflects the US economy (and often economies influenced by the US) and the capital market.

Fine, what’s wrong with FANG now?

Of late, the stocks have taken quite a beating, especially since the start of the month. Apple’s scrip fell 4 per cent, Google and Facebook went down by 13 per cent, and Amazon was down an alarming 19 per cent. Elsewhere, in China, Alibaba Group Holding, which dominates China’s cloud, was down more than 16 per cent.

The fall has been so evident and telling that in two just days since last Monday, the personal wealth of Jeff Bezos, founder and CEO of Amazon, was down by a teary $19.2 billion, according to the Bloomberg Billionaires Index. It’s not just Amazon or the FANGs, most tech stocks have been underperforming for a while now.

But aren’t all stocks taking a hit across the globe now?

Well, that could be true. But the fact that tech stocks, which generally are a cushion during crises and offer hope for future investment opportunities, have been fluctuating for several months now could mean the current slump may persist longer than expected and might evolve into what many grudgingly would call a Third Depression. And considering the way these marquee companies are losing investors confidence, many have started predicting the end of the big tech stock boom.

Can’t this be just another bad cycle?

Some experts would like to believe that this is a healthy side to the downfall — that the data-cloud devices market is showing signs of maturity, shedding off wrong and unrealistic expectations around them. This long spell of correction, as they would like to call the losses, would now prompt the tech companies to get out of their start-up mentalities and act like big corporates and pay more attention to earning profits rather than burning money on wild moves.

That’s a point.

Also, such falls will make the companies introspect on their revenue models. If you recall, this has not been a great year for the data-gorging business models of Facebook, Google and the like. Ever since the Cambridge Analytica big data profiling scandal broke out, questions have been raised on the way tech companies have been monopolising the data economy and many investor collectives and policy bodies have sought changes in the way they conduct their business.

Yes, Europe’s GDPR was (also) in response to such models.

Exactly. This shows tech companies face a web of controls now. Equally important are export policy tweaks introduced by the Trump government in the US. Last June, news of “enhanced export controls” from Trump pulled down tech stocks by several notches as American companies feared it could curb tech transfers from the US to, mainly, China and the move might force Chinese companies to stop buying from US tech companies. Sectors such as electric vehicles, robotics and aerospace were hit badly.

What about India?

India’s IT sector, despite the struggles, is trying to look up again now. The top three Indian IT companies, TCS, Infosys and Wipro, are reported to have hired record numbers in the September quarter. It shows they are going great guns, despite all the uncertainty in the global markets, their own existential crises and a confused policy infrastructure. But will they be able to sustain the momentum and ward off future uncertainty emanating from events like the FAANG fluctuations and the resultant impact on their international clients, is a billion dollar question.

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