The tech wreck 20 years on
It is 20 years to the day, since the tech bubble burst.
On March 10, 2000, the tech-laden Nasdaq Index hit a peak of 5.048.62, valuing listings at US$6.71 trillion. The next day, the crash began in US markets. A frenzied sell-off saw stock prices plunge.
By the end of the year, the Nasdaq had lost 39 per cent of its value and would lose as much again in the grim years of 2001 and 2002, during which time tech companies the world over retrenched, pivoted or folded.
New Zealand had its own dotcom meltdown. Remember Advantage Group, Cadmus, Commsoft and IT Capital? I started my career reporting their post-crash travails.
I was reminded of this on Tuesday as I sat glued to CNBC watching all of the major indices plunge again, hit with the double whammy of Covid-19's spread and an oil price war between Saudi Arabia and Russia.
The difference this time is that tech companies are the stalwarts of the market, the FAANGs (Facebook, Apple, Amazon, Netflix, Alphabet/Google), now the safe harbour stocks investors are keeping or buying as they ride out the volatility.
Sure, those stocks have also taken a hit this year, but with solid balance sheets, billions of customers between them and some of the most valuable intellectual property in the world, they couldn't look much different from the companies that reached their over-inflated peak on March 10, 2000.
I can tell you from watching CNBC all day that the fortunes of the tech sector this year will rest on three things: the speed with which the spread of Covid-19 can be contained, the ability of tech companies to restart disrupted supply chains and the state of consumer and business confidence.
They happen to be the same three things that will determine whether we tip into a recession and the extent of the stimulus efforts required to try and stave that off.
Technology, from the cloud computing platforms that increasingly host our data, to the apps that run our business, is now essentially the core utility the economy runs on. It will continue to be after COVID19 has been contained and vaccinated out of existence. Indeed, tech's moment to shine is now, while people are working remotely in their millions and buying online to avoid the toilet paper rush in supermarkets.
It's no surprise that one of the Nasdaq stocks to ride out the latest market falls relatively intact, is video conferencing specialist Zoom. China's e-commerce giants have also made back their initial losses as Chinese consumers start to spend again.
This year will be tough for tech. Large projects will be deferred in the primary sector, by retailers and government departments. IT procurement is already facing challenges due to lost productivity as Chinese factories shut down. R&D efforts may well be curtailed. Some companies will have to get leaner to survive.
But the point is that the tech sector is better placed than ever to ride out the mayhem this pandemic has created. Whether you are working in a multinational or a start-up, the opportunity is there to show the world that smart technology is what will help us get through this and thrive on the other side.
Peter Griffin is one of New Zealand's leading tech commentators. Follow him on Twitter at @petergnz or contact him on [email protected].
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