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Laid-off Silicon Valley workers panic-sell their startup stocks as valuations tumble – Here are the 3 best tech stocks in 2023 that are actually making money

Laid-off Silicon Valley workers panic-sell their startup stocks as valuations tumble – Here are the 3 best tech stocks in 2023 that are actually making money

Laid-off Silicon Valley workers panic-sell their startup stocks as valuations tumble – Here are the 3 best tech stocks in 2023 that are actually making money

The white-collar recession is well underway.

After nearly a decade of six-figure salaries, cushy jobs and extravagant office perks, Silicon Valley companies are finally downsizing. Nearly 90,000 tech workers were laid off in 2022 alone. This year isn’t off to a great start either. On January 5, Amazon announced the layoff of 18,000 jobs.

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And now, SEC filings show that Microsoft plans to cut 10,000 jobs by the end of the third quarter.

Even those who have (so far) avoided layoffs are not doing much better. Countless tech firms, private and public, have watched their valuations plummet over the past 12 months.

And now, the Financial Times reports that a number of panicked laid-off workers are “flooding the secondary markets” with their shares in their former companies. Which means those valuations are likely to drop further.

Here’s what it could mean for your portfolio—and where you might turn.

Fall technique

Record low interest rates over the past decade have forced more and more investors to look for risky investments. Loss-making technology companies were perhaps the riskiest place for this excess cash. Tech valuations have risen since 2020, allowing startups and tech giants to use their inflated stocks as a way to retain talent.

Technical workers were paid excessive amounts of compensation based on shares. In fact, some companies like Snap and Pinterest paid up to 46% of their total compensation in the form of stock options. This boosted total compensation for tech workers during the expansion, but is now having the opposite effect as valuations are falling.

Invesco KKK Trust ( NASDAQ:KKK ) — a fund that tracks technology stocks — has fallen 22.7% over the past 12 months. Meanwhile, private companies have also seen their valuations fall by as much as 80%. Employees of these firms are rushing to cash out in secondary markets, according to a recent report by the Financial Times.

Companies struggling to turn a profit are by far the biggest losers. An index of loss-making companies compiled by Morgan Stanley fell 54% in the past year. Many of these money-losing companies have seen their valuations settle to pre-pandemic levels.

Looking ahead, some experts believe valuations will not recover until the Federal Reserve pivots on its interest rate strategy. Lower or stable interest rates could make risky tech stocks more attractive. However, this is unlikely to happen until the end of 2023 at the earliest, according to changes in interest rates.

Until then, investors should probably focus on the highly profitable tech companies that were unfairly punished during this crash.

Adobe

Adobe ( NASDAQ:ADBE ) has lost 31% of its value over the past year. The company had great results in the wider market. However, its core business continues to thrive.

The company reported revenue of $17.61 billion for fiscal 2022 — up 12% from the previous year. And in September, the company acquired design platform Figma, which expands Adobe’s suite of core design tools.

The company is also tapping into the coming AI boom by tracking how its users use core tools and integrating OpenAI tools with Figma.

The stock trades at a price-to-earnings ratio of 33.9.

MORE: 4 Simple Ways to Protect Your Money from Sizzling Inflation (Without Being a Stock Market Genius)

Microsoft

Microsoft (NASDAQ:MSFT) is also getting in on the AI ​​boom. The company was an early investor in OpenAI and now has access to ChatGPT for its Bing search engine. The integration could be completed early this year, meaning the online search market is on the verge of disruption.

But none of this is reflected in the share price. Microsoft has lost 21% of its value over the past year. It now trades at just 24.5 times its net earnings per share.

Apple

The most profitable tech company in the world certainly deserves a mention on this list. Apple (NASDAQ:AAPL) posted earnings of $6.11 per share last quarter — up 9% from a year earlier. This year, the company is expected to launch new virtual reality headsets and continue the migration of its supply chain from China to India.

Apple stock trades at 21 times earnings, making it an ideal target for investors in 2023.

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This article provides information only and should not be construed as advice. Provided without any warranty.

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