What about the tech industry? Is it a new bubble?

At previous articler We explain what are the characteristics of an economic bubble trying to understand what's going on in the tech industry. The controversial personality of Elon Musk makes the focus of public opinion on layoffs on Twitter. However, a careful analysis shows us that this is the tip of the iceberg.

You could question me about what is the point of commenting on these issues in a blog about Linux and free software. But, those who ask themselves that question forget that The financing of free and open source software projects increasingly depends on the contributions of companies such as Google, Facebook or Twitter. Any problem that affects them will end up affecting those projects.

What about the tech industry?

In the previous article we had said that an economic bubble (The rapid rise in the stock market value of a company followed by an abrupt decline) can come from two factors: shareholders and consumers. To try to determine if we are facing a new bubble, we will see what is happening with each of the two sectors.

Shareholders

Analyzing the stock market of the technology sector, we find that the only one that has something to celebrate is Apple. So far this year, it has only lost 16% in the price of its shares. Meta, the parent of Facebook, accumulated 50% more. It didn't fare too well for Alphabet (Google) and Amazon either. other companies such as Microsoft, Nvidia and Tesla saw their stock market value fall by between 25 and 45 percent. The Nasdaq index decreased by 30%

According to analysts, this is due to two factors. An internal one, lack of confidence in the new strategies of the companies and an external one, the possible economic recession worldwide.

Changing strategies

With a previous article we tried to explain what the metaverse is and came to the conclusion that it is vaporware. Shareholders apparently think the same. Mark Zuckerberg's great commitment to virtual reality has not materialized in viable products for a year.

global recession

Different is the problem of Alphabet (Google), Amazon and Apple. The strength of Google's business is advertising. If there is a recession, the first expenses that companies restrict are advertising.

Amazon and Apple earn most of their income from the sale of products or services. It is easy to understand that a restriction on consumer income will have a direct impact on the income of these companies.

The consumers

Both the consumer technology and Internet services markets are saturated. Desktop computers had a bit of a resurgence fueled by quarantine isolation, but it's fading. It is enough to take a look at the new models of mobile phones to realize that they have nothing to contribute other than a higher resolution for the camera or a casing that bends.

The number of streaming platforms outweighs the average user's ability to watch all of your content, assuming you find someone who is into all of your content, which is not the case. Social networks, for their part, are far from their moment of glory. A few thousand users concentrate the attention of a minority, but this is less and less.

Bubble or no bubble?

It is not a bubble. The wave of double-digit layoffs at big tech companies stems from the failure of companies to find new markets in which to develop. Neither Amazon's efforts in artificial intelligence (while Jeff Bezos was playing with rockets) nor those of Google trying to enter the home appliance market, passing through those of Meta and Apple with augmented reality achieved the impact of the products that achieved their growth. Investors and consumers are taking their money elsewhere.

And, this is good news for open source projects.. It is about locating new opportunities and developing products that meet the needs of consumers. Of course, respecting the privacy and freedom of users.