Published on May 23rd, 2020 | by Saša Vujnović0
How Did the COVID-Induced Stock Market Crash Affect the Tech Industry?
The cyclical nature of stock markets is a double-edged sword, and it takes a lot of skill to maneuver around the interchanging bull and bear periods. But when a bull does indeed rear its ugly head, and the stocks go on a downward spiral, it’s not easy to stay calm and composed.
Stock market crash statistics reveal that black swans appear every once in a while. Well, the COVID-19 pandemic triggered one such turmoil, and stocks took a nosedive during the first quarter of 2020.
So, did the stock market crash also affect the tech community? Who are the winners, and what can we expect in the days to come? Let’s find out.
Image by Rick Tap from Unsplash
What Exactly Happened with the Stock Market Crash?
As we said, the stock market is a volatile environment. The value of stocks is in constant motion, but sometimes things get out of control.
The reasons for a stock market crash can be different, and they often include corporate debt or market instability. Of course, the consequences of the market drop can vary as well.
For instance, stock market crash statistics state that the dot-com crash (1999–2000) cost investors a staggering $5 trillion. Likewise, the 2008 market crash destroyed $2 trillion in retirement savings.
In early 2020, the outbreak of the novel coronavirus caused massive instability in current stock markets. The so-called panic-trading began in late February. In March, the New York Stock Exchange stopped trading four times before it closed on March 23.
Lockdown measures stopped the entire world in its tracks, and the same happened to the stock markets. The DOW and NASDAQ indexes have seen a dramatic decline in value. The same goes for the S&P 500 index.
Of course, policymakers are trying to come with all sorts of stimulus measures to revive the economy. Rescue packages are providing an influx of cash that should stimulate the recovery, but the outlook is bleak.
Image from Pixabay
The Effects of COVID-19 on the Tech World
COVID-19 has proved that, in times of crisis, the rich get richer while the poor suffer the most. In other words, the pandemic has benefited some corporations but not all of them.
For example, the lockdown caused a spike in demand for e-commerce businesses as well as delivery services.
Also, streaming services have seen a jaw-dropping rise in popularity. Thus, the Netflix market capitalization has climbed to $199 billion, making it worth more than Disney.
A similar situation happened to all the tech companies that enable remote learning or some sort of online collaboration. The most prominent examples are Slack, Skype, or Zoom. In April, the number of daily users of Microsoft Teams jumped from 12 million to 44 million!
On the other hand, tech giants like Uber or Tesla have experienced a massive fall in the value of their shares. In early March, Tesla’s market value plummeted by as much as $14 billion.
Tech companies that focus on traveling (Airbnb) have also seen a staggering drop in demand.
What Awaits the Tech Community in the Years to Come?
Whether they like it or not, the majority of tech companies out there must modify their services to adapt to the pandemic. By doing so, they can stay relevant and boost their market value.
COVID-19 emphasized the need for structural changes, and the enterprises are embracing cloud-based technologies and big data systems. Also, tech firms need to focus on the use of AI as well as the implementation of remote working.
Even though the stock market has seen its fair share of ups and downs over the years, the recent fluctuations set a worrisome trend. In essence, everything points to an upcoming recession.
Nevertheless, stock markets are trying to get back on their feet; slowly but surely. The New York Stock Exchange will accept on-floor traders on May 26, and other stock markets could follow suit.
When it comes to the tech world, it is too early to tell which companies benefited from the pandemic the most. Once the market stabilizes, we will be able to analyze the performance and determine the stock market value of tech firms.