Facebook (META) and Nvidia (NVDA) two of the flagships of technology, seem to be going through a real ordeal.
Both companies lost tens of billions of dollars in market capitalization during the trading week ending Sept. 16.
The consequences are huge for these two companies that have just been removed from the top 10 most valued companies in the world.
The networking giant Facebook, now called Meta Platforms, is only a shadow of what it was a year ago. Indeed, on September 7, 2021, Facebook joined the prestigious club of companies worth at least $1 trillion with a market cap of $1.078 trillion that day.
Out of the top 10
The $1 trillion club has only five members: Apple (AAPL) the Saudi oil giant Saudi Aramco, Microsoft (MSFT) Alphabet (GOOGL) and Amazon (AMZN) , according to companiesmarketcap.com. The electric vehicle manufacturer Tesla (TSLA) which was briefly part of this club is knocking on the door again with a market cap of $944 billion as of Sept. 16.
A year later, Facebook’s market cap has fallen by nearly two-thirds. The company weighs just $393.2 billion, down 63.5%. This level of market cap is the lowest level Mark Zuckerberg’s empire has ever reached since January 7, 2019. At the time, Facebook was mired in the Cambridge Analytica scandal. The social network allowed the consultancy, which partnered with Donald Trump’s campaign team before the 2016 presidential election, to collect private data from tens of millions of users with which it could profile voters.
On September 16, Facebook shares closed the trading week with a total decline of 13.5% to $146.29, close to their lowest price of $146.01 on March 16, 2020, when restrictions imposed in the early days of the covid-19 pandemic caused panic among investors.
Last week, Facebook lost some $62 billion in market value, making it out of the top 10 in terms of market capitalization. The group is now the 12th most valuable company in the world.
In July, Facebook announced its first quarterly revenue decline since its IPO in 2012.
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It’s true that the economic slowdown and a likely recession are threatening the revenue generated by Facebook’s advertising, bread and butter. But the owner of Instagram and WhatsApp also sees the competition stealing market share from the company.
Last year, Apple gave users more control over their privacy settings when downloading apps. The new feature is called App Tracking Transparency (ATT) and all third-party apps must get user consent before the companies can track their movements online for ad targeting.
The year 2022 also looks like an agony for Nvidia.
There are big numbers to worry about: Nvidia shares fell 8.3% to $131.98 in the trading week ending Sept. 16. So the company lost another $30 billion in market value that week.
Since hitting a record high of $823.31 billion in market cap on November 15, 2021, Nvidia has seen this market cap — currently $328.9 billion — melt by more than 60% in 10 months. In short, in less than a year, nearly $500 billion in market cap has melted away.
Nvidia is now only the 19th most valuable company in the world and could disappear from the Top 20 if the decline continues.
As with Facebook, the current economic climate is not good for Nvidia’s sales, which are struggling with large inventories. The company itself admitted that it has too many graphics processing units, RTX 3000 graphics cards, in stock. The surplus stems from the decline in consumer demand, especially gamers, in recent months.
It will therefore drastically cut its prices to get rid of these voluminous stocks before launching the next generation.
“We have implemented programs with our gaming channel partners to adjust pricing in the channel and to position current high-end desktop GPUs as we prepare to launch a new architecture,” said Chief Financial Officer Colette Kress. to analysts on Aug. 24. “As noted last quarter, we expected cryptocurrency money to make a declining contribution to gaming demand.”
Nvidia is also being impacted by an expected drop in demand for its graphics cards in the crypto industry, after Ethereum, one of the most active crypto platforms, just left the transaction validation mechanism, which required a significant use of computing power.