The dream run that continued well into 2022, however, started to falter as inflation reached 40-year highs and the U.S. Federal Bank decided to step in. Interest rates that were virtually nil were periodically increased and as the year comes to an end, they have climbed to four percent today. Investors reacted to this, dropping tech stocks across the board. The tech-heavy Nasdaq 100 is down 41 percent since the beginning of the year.
Why investors fled tech stocks
As the U.S. Federal Bank hiked interest rates, borrowing money became more expensive and this reduced demand, which in turn softened prices that were inching higher. This was the intended outcome of the rate hikes.
However, the move had another impact which was improving the returns on savings and bonds, which are less risky assets, as compared to stock, Markets Insider explained in its post. Tech stocks, in particular, are valued on their potential cash flow in the future, but as the world heads into a recession, future earnings are bound to be impacted, making these stocks less attractive.
Investors parked their money in less risky assets and the valuations of tech stocks started dropping, wiping away billions from founders and CEOs whose personal fortunes are tied to the stocks they hold.
Musk, Bezos, and Zuck are the biggest losers
Elon Musk led the charge of biggest losers on the Billionaire lists as he saw fortunes of over $140 billion being wiped off in 2022. Jeff Bezos also lost significant chunks of his personal fortune as $86 billion has been wiped off after his company, Amazon’s stock value has halved this year.
The richest tech founders and executives lost $400 billion in 2022
