By Jasper Jolly for City A.M
The US’s biggest technology stocks – Facebook, Amazon, Netflix and Google, collectively known as the Fangs – have fallen steeply as concerns over a trade war weighed on world indices.
The tech-heavy Nasdaq index fell by more than two per cent to its lowest close since the end of May.
Facebook and Amazon both lost over 2.5 per cent, while Netflix plummeted by more than six per cent. Apple and Alphabet, the parent company of Google, also fell heavily.
Equity indices around the world had earlier slumped, with France’s Cac 40 losing almost two per cent while Germany’s Dax gave up 2.46 per cent as investors feared further damaging trade moves.
American tech stocks have generally been immune to fears over protectionist trade tariffs, with no mention by either the US, China, or the EU of levies or other barriers to be imposed on them.
However, Russ Mould, investment director at trading platform AJ Bell, said the recent success of the Fang stocks – an acronym of the tech giants – in spite of market ructions may have made shares more vulnerable to bigger moves if sentiment shifts.
The Fangs may be “targets for some profit taking” if investors plump for cash amid fears of a broader market setback, he said.
The tech stocks are approaching similar levels of growth hit by the Nasdaq during the dotcom bubble at the turn of the century, which ended in a deep crash of more than 78 per cent, Mould said.
Over the course of 2018 a “Fangs+” index, which includes other large US-listed tech firms, has outpaced the gains of the bubble-era Nasdaq.
Yet the Fangs still face regulatory issues which could severely impact their business models, following the scandal over data misuse by political consultancy Cambridge Analytica, competition concerns, and ongoing tax issues.
“The danger for bulls is that these valuations leave little margin for error should something – anything – go wrong,” Mould added.