This is the current situation of investing in technology stocks

During the past decade, the investment in tech stocks They were gold mines for investors. But it seems that with the start of this bear market, technology stocks are one of the sectors that have suffered the most falls. These events have caused investors to begin to move away from this sector. So, let's analyze the situation of investing in technology stocks and what investors can expect...

1. Meta (former Facebook)

Facebook's parent company (META) bet big on the metaverse with a name change a year ago and, despite the 70% drop in the price of Meta's stock investment, Mark Zuckerberg, its CEO, He seems as confident as ever. So much so that he is putting his money (well, the shareholders' money...) where he wants. The company has announced a big increase in expenses, while also betting on the metaverse and fighting its rival TikTok on the social media front. But Meta is unlikely to turn its virtual future into near-term profits, which has raised questions about the future of the company's direction.

What can investors expect?​

Investing in Meta shares is between a rock and a hard place. Investors would not be happy if Meta turned a deaf ear to the competition, accepted that its core platforms (Instagram and Facebook) are maturing, and managed the business accordingly. That would be a better option than putting all your eggs in one basket, which is why investors are furious. So if we believe Facebook and Instagram have a longer lifespan than people think, Meta stock, now at an all-time low valuation, is a long-term opportunity with quite a bit of risk.

2 Amazon

Amazon (AMZN) is one of the companies that is beginning to feel a decline. During the time of confinements they benefited from growing consumer demand. But it seems that after presenting the quarterly results the first doubts have arisen, since the department that generates the most income for Amazon (Amazon Web Services) has entered a stage of lower growth. As we can see in the graph below, Amazon's free cash flow has plummeted after stringing together excellent results year after year.

What can investors expect?​

In the case of growing companies like Amazon, investors may be willing to overlook profits in favor of sales growth, as long as there is a reward in the future. Over the past few years, Amazon has been on a trajectory of impressive growth and improving profitability in part thanks to the AWS service.

However, the company's aggressive spending has put the company in a delicate situation. This event has spread to the company's shares, which have fallen more than 40% throughout this year. For this decline to become an opportunity, Amazon should reduce spending and maintain a healthy level of growth. At the moment, pessimistic sentiment has settled on Amazon since there is no hope that this will happen.

3 Alphabet

Alphabet (GOOG/GOOGL) have different businesses with an excellent future. Alphabet's cloud platform (in third position behind AWS and Azure) has been growing steadily. At the same time, they are also at the forefront of innovative technologies such as artificial intelligence (AI). Of course, the cloud storage business represents less than 10% of the company's sales, and AI has many years of development left. Therefore, the advertising business is the epicenter of its income. This business has been growing constantly, as we can see in the following graph:

During the pandemic, advertising revenue fell only 8%, and grew after the lockdowns ended. But the last two quarters have not gone as expected. From Alphabet they blame the decline in the economy and in turn the impressive growth rates of the previous year that make the comparisons not entirely accurate. Of course, the advertising market is mature and there is a lot of capital that has already been transferred to the digital sector. All of this means that Alphabet's future growth is in question.

What can investors expect?​

In the following chart we can see that the price-earnings ratio (P/E) of investing in Alphabet shares is close to its historical lows. We can interpret that investors have no hope that Alphabet can recover its advertising growth rate in the short term. Therefore, at this time, risks to Alphabet's short- and long-term growth are dominating the environment. But if advertising revenue recovers next year and the cloud storage business continues to advance, Alphabet's results could start to look better once again. Feeling, after all, can be somewhat unpredictable.

4 Microsoft

Microsoft's cloud services business (MSFT) now accounts for more than 50% of the company's total revenue. If we count the pandemic-driven teleworking boom, the software giant's sales have generated 20% growth in the last two years, the fastest pace in 20 years. But with laptop and desktop sales in full decline, Microsoft's cloud business needs to match sustainable growth of about 20% from last quarter if they want to maintain their impressive streak of sales growth.

What can investors expect?​

The Azure cloud services business (an important part of the company) saw slower-than-expected growth of 35% last quarter. These data have shaken investors' outlook. At the current price, the stock is trading at 23 times its P/E ratio, returning to levels last seen in 2017. This suggests to us that investors do not expect the growth of recent years to continue. If Azure's growth slows significantly from here, investors will likely lower those expectations even further, and that wouldn't be good for its stock price. But if Azure maintains growth similar to last quarter, they will likely fade that negative sentiment.

5. Apple

Without a doubt, iPhones have been both a revolutionary invention and a gold mine for Apple (AAPL), but we don't know if this will ever change. Of course, Apple products are likely to continue growing for some time. After all, the brand has a loyal following who will pay for the latest devices, and there are plenty of untapped customers in places like India. Still, it is unlikely that Apple will continue to advance at the same pace as it has in the last ten years. Its growth also depends on a couple of other factors. It is questioned whether the company's services (representing 20% ​​of current sales) continue to increase. Also its positioning in technological innovations such as AI.

What can investors expect?​

Expect Apple's long-term sales growth to slow, but it will be crucial to know whether it will be 2-4% or 6-8%. Apple's stock price valuation has risen in recent years, raising the bar for expectations a bit. So a slowdown of those departments probably won't be very welcome.