Accelerating tech layoffs: Dotcom bubble once again?

Recent layoffs suggest that more than 45% of the stocks are down 50%, which has only happened twice, the 2008 recession and the dotcom Bubble.

It was during the 1990s when US dotcom (Internet) companies were literally swimming in cash. Investors had realized the future of the Internet, and it was their time to make profits. At least they thought so.

The situation of the equity market was such that within five years, from 1995 to 2000, the technology-dominated Nasdaq index rose from less than 1000 to more than 5000!

Then suddenly, one day, people saw the bubble bursting. The losses were unimaginable, Nasdaq dropped almost 77%, billions of dollars vapourised. Puff!

Is it happening all over again?

Recent layoffs suggest that more than 45% of the stocks are down 50%, which has only happened twice, the 2008 recession and the dotcom Bubble.

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If we glance at last month’s layoff, we can see tech companies are scared of impending danger. Which, to be honest, might be a promising sign.

See, the dotcom bubble fabricated because of overconfidence. Venture capitalists were hungry to get their hands on any “dotcom” company that might fetch them profits in the future. They were investing blindly like its free money.

Investors overlooked all the major fundamentals and invested heavily, while many companies didn’t log a penny as profit, several companies didn’t even have a product ready, and the valuations estimated in Millions.

In short, the fear of loss got overshadowed by speculation and ambitions. Do you see any similarities? Yep, it’s all over again. History repeats, and it’s happening. In pandemic, people made millions, if not billions.

There was a period in the pandemic when most of the investors were making a profit; it was easy money. A lot of cash flow in the market, and people like you and I made fortunes. A lot of investors made millions in the crypto market by crazy judgments; the websites were built running Elon-Musk-only news.

When we lifted the lockdowns, and the world was again out of their house, they saw their cars were getting costlier, it was infeasible to buy a PlayStation, and their mobiles were not as cheap as they used to be. The chip shortage was real, and it affected many industries.

Then, crude oil also met the same fate. The production was not at a spot to ramp up on time, and the prices went up. Due to the crude oil jump, countries started facing inflation. The Russia-Ukraine war too aided this.

And suddenly, all the investors and companies discovered, they might want to slow down. At least 22,800 tech employees across 155 different companies have been laid off since the start of 2022.

There was a laid-off Coinbase employee who told Yahoo Finance that he graduated from a highly ranked college, and was happy when he joined Coinbase.

“I had the best interview experience I’d ever had,” he said. “Coinbase really did have a great culture before it went remote.”

Then one day, he received this letter from Coinbase.

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Last month only, many tech giants laid off their employees. Netflix laid off around 2% of its workforce, Twitter took it to 30%. Elon musk decided to let 10% of his staff go, and Microsoft and Meta came to the conclusion that it’ll be a better option if they slow down the hiring.

Where are we heading?

Listen, a market crash is good. No, I’m not mad, sincerely, it’s good.

What will now happen is that big giants will move cautiously; they won’t take risks. Instead of expanding, they will focus on maintaining. Several companies are, to this date, running in loss. They would want to stabilize it.

This decade was gold for startup ecosystem, that we must admit. India became the third country to get 100 unicorns, many startups got millions of dollars as funding. Now, at least for a couple of years, not many startups will grow exponentially. Startups now will try to be in profit rather than spending 90% or more funding on advertising.

One significant difference between dotcom bubble and today is that the giant companies are making real profits. In the ’90s there were hardly any internet companies that made investors money.

Don’t panic, like every atrocious time in history, this too shall pass. The market is in recovery mode, and money is getting reshuffled; those who’ll take a risk will again be millionaires in upcoming years.

Coming months are not easy, but with good intentions and ideas, never go in loss.


Disclaimer
The opinions expressed in this article are of the author. They do not purport to reflect the opinions or views of the India Shorts.

Sources:

https://finance.yahoo.com/news/heres-whats-driving-tech-layoffs-104304517.html
https://www.investopedia.com/terms/d/dotcom-bubble.asp
https://biovox.eu/is-the-dot-com-bubble-bursting-all-over-again/
https://twitter.com/jasongoepfert/status/1520040516955643905
https://analyticsindiamag.com/tech-layoffs-are-accelerating-here-are-the-recent-big-ones

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