I want to understand how the financial market works. So up until few months back all these investors were fine when amazon was investing and growing with not much profit. (They made a lot of profit during pandemics and not really much before that). But now why have they lost faith in the big tech companies and asking them to cut costs and show profits when the market is not doing good. Also who are these investors ? Big tech is one of the most profitable corporations that exist and still they are not satisfied with the profits these companies are showing. How does the finance world works ? #finance #layoffs Another question is isn’t the financial s team at these companies competent enough to know that with what was going on in the world the chances of fed increasing interest rate is high and that they should have taken caution and hired/invested pessimistically. Or are they okay about using their employees as tools and don’t mind firing them when the time comes. With all the cool companies firing employees, i feel like big tech believed that pandemic will move us towards a dystopian world where they would get too big but that didn’t happen and it backfired on their strategies. Coz old companies like ibm, citrix etc seem to be relatively stable. TC : 240k
> are they okay [with]… Yes, they simply do not care about you. It is 100% about profits.
End of free money is finally over
It’s simple. The interest rate changed. Few years ago, the fed funds rate was close to 0%. There was nowhere for fund managers to put money. So growth at any cost was acceptable. Now the fed funds rate is over 3%. Why invest that in AMZN when you’re getting 3%+ risk free?
Because 3% is still a shit rate of return even when risk free.
Yes but at least there is no capital risk. Stocks on the other hand given the volatility. Who knows ?
They have always cared as long as there was sufficient ROI. Now that larger macroeconomic issues have reduced the returns, ROI is now smaller
Most points above apply but a more technical point if you care is Until 4-6 months ago, I was really cheap for companies to borrow money and power growth. Now with interest rates being high, they cannot borrow money as easy or at lower rates like before and that leads to cost cutting
Its about squeezing more FCF and drive up / protect valuation.
Following the herd
It's all made up, investors have no clue what they are doing, all they see is line went down and decide it's because of expense of engineers and not the economy.
Also they don't realize that if they push too hard with layoffs they risk causing real irreparable damage to these companies. What will bring these tech stocks back to their former glory won't be some 20% cost reductions on the balance sheet but their ability to innovate and execute and be competitive.
They always cared about profits, growth and cash on hand.
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