Tech’s reality check: How the industry lost $7.4 trillion in one year
Pedestrians walk past the NASDAQ MarketSite in New York’s Times Square.
Eric Thayer | Reuters
It seems like an eternity ago, but it’s just been a year.
At this time in 2021, the Nasdaq Composite had just peaked, doubling since the early days of the pandemic. Rivian’s blockbuster IPO was the latest in a record year for new issues. Hiring was booming and tech employees were frolicking in the high value of their stock options.
Twelve months later, the landscape is markedly different.
Not one of the 15 most valuable U.S. tech companies has generated positive returns in 2021. Microsoft has shed roughly $700 billion in market cap. Meta’s market cap has contracted by over 70% from its highs, wiping out over $600 billion in value this year.
In total, investors have lost roughly $7.4 trillion, based on the 12-month drop in the Nasdaq.
Interest rate hikes have choked off access to easy capital, and soaring inflation has made all those companies promising future profit a lot less valuable today. Cloud stocks have cratered alongside crypto.
There’s plenty of pain to go around. Companies across the industry are cutting costs, freezing new hires, and laying off staff. Employees who joined those hyped pre-IPO companies and took much of their compensation in the form of stock options are now deep underwater and can only hope for a future rebound.
IPOs this year slowed to a trickle after banner years in 2020 and 2021, when companies pushed through the pandemic and took advantage of an emerging world of remote work and play and an economy flush with government-backed funds. Private market darlings that raised billions in public offerings, swelling the coffers of investment banks and venture firms, saw their valuations marked down. And then down some more.
Rivian has fallen more than 80% from its peak after reaching a stratospheric market cap of over $150 billion. The Renaissance IPO ETF, a basket of newly listed U.S. companies, is down 57% over the past year.
Tech executives by the handful have come forward to admit that they were wrong.
The Covid-19 bump didn’t, in fact, change forever how we work, play, shop and learn. Hiring and investing as if we’d forever be convening happy hours on video, working out in our living room and avoiding airplanes, malls and indoor dining was — as it turns out — a bad bet.
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Add it up and, for the first time in nearly two decades, the Nasdaq is on the cusp of losing to the S&P 500 in consecutive years. The last time it happened the tech-heavy Nasdaq was at the tail end of an extended stretch of underperformance that began with the bursting of the dot-com bubble. Between 2000 and 2006, the Nasdaq only beat the S&P 500 once.
Is technology headed for the same reality check today? It would be foolish to count out Silicon Valley or the many attempted replicas that have popped up across the globe in recent years. But are there reasons to question the magnitude of the industry’s misfire?
Perhaps that depends on how much you trust Mark Zuckerberg.
Meta’s no good, very bad, year
It was supposed to be the year of Meta. Prior to changing its name in late 2021, Facebook had consistently delivered investors sterling returns, beating estimates and growing profitably with historic speed.
The company had already successfully pivoted once, establishing a dominant presence on mobile platforms and refocusing the user experience away from the desktop. Even against the backdrop of a reopening world and damaging whistleblower allegations about user privacy, the stock gained over 20% last year.
But Zuckerberg doesn’t see the future the way his investors do. His commitment to spend billions of dollars a year on the metaverse has perplexed Wall Street, which just wants the company to get its footing back with online ads.
The big and immediate problem is Apple, which updated its privacy policy in iOS in a way that makes it harder for Facebook and others to target users with ads.
With its stock down by two-thirds and the company on the verge of a third straight quarter of declining revenue, Meta said earlier this month it’s laying off 13% of its workforce, or 11,000 employees, its first large-scale reduction ever.
“I got this wrong, and I take responsibility for that,” Zuckerberg said.
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Mammoth spending on staff is nothing new for Silicon Valley, and Zuckerberg was in good company on that front.
Software engineers had long been able to count on outsized compensation packages from major players, led by Google. In the war for talent and the free flow of capital, tech pay reached new heights.
Recruiters at Amazon could throw more than $700,000 at a qualified engineer or project manager. At gaming company Roblox, a top-level engineer could make $1.2 million, according to Levels.fyi. Productivity software firm Asana, which held its stock market debut in 2020, has never turned a profit but offered engineers starting salaries of up to $198,000, according to H1-B visa data.
Fast forward to the last quarter of 2022, and those halcyon days are a distant memory.
Layoffs at Cisco, Meta, Amazon and Twitter have totaled nearly 29,000 workers, according to data collected by the website Layoffs.fyi. Across the tech industry, the cuts add up to over 130,000 workers. HP announced this week it’s eliminating 4,000 to 6,000 jobs over the next three years.
For many investors, it was just a matter of time.
“It is a poorly kept secret in Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people,” Brad Gerstner, a tech investor at Altimeter Capital, wrote last month.
Gerstner’s letter was specifically targeted at Zuckerberg, urging him to slash spending, but he was perfectly willing to apply the criticism more broadly.
“I would take it a step further and argue that these incredible companies would run even better and more efficiently without the layers and lethargy that comes with this extreme rate of employee expansion,” Gerstner wrote.
Activist investor TCI Fund Management echoed that sentiment in a letter to Google CEO Sundar Pichai, whose company just recorded its slowest growth rate for any quarter since 2013, other than one period during the pandemic.
“Our conversations with former executives suggest that the business could be operated more effectively with significantly fewer employees,” the letter read. As CNBC reported this week, Google employees are growing worried that layoffs could be coming.
SPAC frenzy
Remember SPACs?
Those special purpose acquisition companies, or blank-check entities, created so they could go find tech startups to buy and turn public were a phenomenon of 2020 and 2021. Investment banks were eager to underwrite them, and investors jumped in with new pools of capital.
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SPACs allowed companies that didn’t quite have the profile to satisfy traditional IPO investors to backdoor their way onto the public market. In the U.S. last year, 619 SPACs went public, compared with 496 traditional IPOs.
This year, that market has been a bloodbath.
The CNBC Post SPAC Index, which tracks the performance of SPAC stocks after debut, is down over 70% since inception and by about two-thirds in the past year. Many SPACs never found a target and gave the money back to investors. Chamath Palihapitiya, once dubbed the SPAC king, shut down two deals last month after failing to find suitable merger targets and returned $1.6 billion to investors.
Then there’s the startup world, which for over a half-decade was known for minting unicorns.
Last year, investors plowed $325 billion into venture-backed companies, according to EY’s venture capital team, peaking in the fourth quarter of 2021. The easy money is long gone. Now companies are much more defensive than offensive in their financings, raising capital because they need it and often not on favorable terms.
“You just don’t know what it’s going to be like going forward,” EY venture capital leader Jeff Grabow told CNBC. “VCs are rationalizing their portfolio and supporting those that still clear the hurdle.”
The word profit gets thrown around a lot more these days than in recent years. That’s because companies can’t count on venture investors to subsidize their growth and public markets are no longer paying up for high-growth, high-burn names. The forward revenue multiple for top cloud companies is now just over 10, down from a peak of 40, 50 or even higher for some companies at the height in 2021.
The trickle down has made it impossible for many companies to go public without a massive markdown to their private valuation. A slowing IPO market informs how earlier-stage investors behave, said David Golden, managing partner at Revolution Ventures in San Francisco.
“When the IPO market becomes more constricted, that circumscribes one’s ability to find liquidity through the public market,” said Golden, who previously ran telecom, media and tech banking at JPMorgan. “Most early-stage investors aren’t counting on an IPO exit. The odds against it are so high, particularly compared against an M&A exit.”
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There have been just 173 IPOs in the U.S. this year, compared with 961 at the same point in 2021. In the VC world, there haven’t been any deals of note.
“We’re reverting to the mean,” Golden said.
An average year might see 100 to 200 U.S. IPOs, according to FactSet research. Data compiled by Jay Ritter, an IPO expert and finance professor at the University of Florida, shows there were 123 tech IPOs last year, compared with an average of 38 a year between 2010 and 2020.
Buy now, pay never
There’s no better example of the intersection between venture capital and consumer spending than the industry known as buy now, pay later.
Companies such as Affirm, Afterpay (acquired by Block, formerly Square) and Sweden’s Klarna took advantage of low interest rates and pandemic-fueled discretionary incomes to put high-end purchases, such as Peloton exercise bikes, within reach of nearly every consumer.
Affirm went public in January 2021 and peaked at over $168 some 10 months later. Affirm grew rapidly in the early days of the Covid-19 pandemic, as brands and retailers raced to make it easier for consumers to buy online.
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By November of last year, buy now, pay later was everywhere, from Amazon to Urban Outfitters‘ Anthropologie. Customers had excess savings in the trillions. Default rates remained low — Affirm was recording a net charge-off rate of around 5%.
Affirm has fallen 92% from its high. Charge-offs peaked over the summer at nearly 12%. Inflation paired with higher interest rates muted formerly buoyant consumers. Klarna, which is privately held, saw its valuation slashed by 85% in a July financing round, from $45.6 billion to $6.7 billion.
The road ahead
That’s all before we get to Elon Musk.
The world’s richest person — even after an almost 50% slide in the value of Tesla — is now the owner of Twitter following an on-again, off-again, on-again drama that lasted six months and was about to land in court.
Musk swiftly fired half of Twitter’s workforce and then welcomed former President Donald Trump back onto the platform after running an informal poll. Many advertisers have fled.
And corporate governance is back on the docket after this month’s sudden collapse of cryptocurrency exchange FTX, which managed to grow to a $32 billion valuation with no board of directors or finance chief. Top-shelf firms such as Sequoia, BlackRock and Tiger Global saw their investments wiped out overnight.
“We are in the business of taking risk,” Sequoia wrote in a letter to limited partners, informing them that the firm was marking its FTX investment of over $210 million down to zero. “Some investments will surprise to the upside, and some will surprise to the downside.”
Even with the crypto meltdown, mounting layoffs and the overall market turmoil, it’s not all doom and gloom a year after the market peak.
Golden points to optimism out of Washington, D.C., where President Joe Biden’s Inflation Reduction Act and the Chips and Science Act will lead to investments in key areas in tech in the coming year.
Funds from those bills start flowing in January. Intel, Micron and Taiwan Semiconductor Manufacturing Company have already announced expansions in the U.S. Additionally, Golden anticipates growth in health care, clean water and energy, and broadband in 2023.
“All of us are a little optimistic about that,” Golden said, “despite the macro headwinds.”
Go back a decade and most Americans had never heard of Huawei. Today, the Chinese telecom giant is a symbol of how quickly China can dominate a strategic technology sector and in the process create new national security and market threats for U.S. government and industry.
Democratic Senator Mark Warner of Virginia, the top Democrat on the Senate Select Committee on Intelligence, is now worried about another Chinese company that he predicts will eclipse Huawei in both scale and consequence: BGI. It is not building cell towers or smartphones for the 5G era. It is collecting DNA.
“If Huawei was big, BGI will be even bigger,” Warner said at the CNBC CFO Council Summit in Washington, D.C. on Wednesday.
BGI is one of the largest genomics companies in the world. It operates DNA sequencing laboratories in China and abroad. It processes genetic data for hospitals, pharmaceutical firms and researchers across dozens of countries, according to a recent report by the National Security Commission on Emerging Biotechnology.
The company began as a Beijing-based research entity, the Beijing Genomics Institute, tied closely to China’s national genome projects. It later expanded into a global commercial powerhouse, selling DNA sequencing, prenatal testing, cancer screening, and large-scale population genetic analysis, according to an NBC News report.
Through subsidiaries, BGI says it operates in the U.S. Europe, and Japan. In several countries, it helped built national genetic databases and pandemic testing systems.
A man visits the booth of BGI at the Healthy Life Chain area of the third China International Supply Chain Expo CISCE in Beijing, capital of China, July 16, 2025.
Xinhua News Agency | Xinhua News Agency | Getty Images
U.S. intelligence officials believe that global footprint gives BGI access to one the largest collections of genetic data on Earth. Lawmakers have warned that genetic data is not just medical information. At scale, it becomes a strategic asset spurring a “DNA arms race,” according to a Washington Post report. DNA profiles can reveal ancestry, physical traits, disease risk, and family relationships, and when linked with artificial intelligence, the data can also be used for surveillance, tracking and long-term biological research tied to national security, according to the Washington Post’s reporting.
At the CNBC event this week, Warner continued to press for more focus on BGI. “They are hoovering up DNA data,” Warner said. “This level of experimentation on humans and intellectual property theft, we all should be concerned about it.”
Congressional investigators have previously warned that BGI maintains close ties to the Chinese Communist Party and Chinese military, according to a report from the House Select Committee on the CCP. They argue that China makes little distinction between commercial data and state security needs.
The ‘super soldier’ fear
One of the biggest fears tied to BGI and China’s broader biotech push is the possibility of a genetically enhanced soldier. U.S. officials have publicly claimed that China has explored human performance enhancement and military biotechnology. U.S. defense analysts say China’s research spans population DNA collection, military databases, and AI-driven human performance modeling, according to a Wall Street Journal op-ed written by U.S. Director of the Central Intelligence Agency John Ratcliffe in 2020, when he was Director of National Intelligence during President Trump’s first term.
Warner directly referenced those concerns this week.
“It’s terrifying,” Warner said.
Troops make preparations before a military parade in Beijing, capital of China, Sept. 3, 2025.
Xinhua News Agency | Xinhua News Agency | Getty Images
Warner described China as a great nation and great competitor, and as a former telecom executive (he was among the founders of Nextel), he said what Huawei was able to execute on — producing good products at inexpensive prices before the U.S. and Western competitors were prepared — is a cautionary tale.
The BGI story looks uncomfortably familiar to Warner.
“Go back in time eight or nine years, and most people had never heard of Huawei,” he said.
Huawei rose by combining massive state support, global market access and aggressive pricing, not only outcompeting Western firms on scale and cost, but positioning itself inside the world’s telecom infrastructure before governments understood the security implications. Huawei was first placed on a U.S. trade blacklist in 2019, which banned U.S. firms from selling some technology to the Chinese tech giant over national security concerns. Chip restrictions on Huawei have since become even stricter.
But Warner said by the time the U.S. moved to restrict Huawei, “[we started to] lose a little.”
Much of the 5G backbone had already been shaped by Chinese technology.
During a separate interview with Javers at the CNBC CFO Council Summit, the Republican Chairman of the House committee on the Chinese Communist Party, Michigan congressman John Moolenaar, said “We’ve seen how they run the play of excess capacity, price manipulation, driving people out of business in different areas; they’re going to continue to run that play,” he said. “We want to be friendly with China, but China is not our friend. They are our foremost adversary,” he added.
The Soviet Union was a military and ideological competitor, but China, in tech domain after domain, Warner says — from telecom and 5G to AI, quantum computing and biotech — is a different kind of competitor.
Warner now sees BGI following a similar model in biotechnology. Like Huawei, BGI scaled rapidly with state support. The Washington, D.C.-based think tank Foundation of Defense of Democracies called upon lawmakers of both parties earlier this year to restrict BGI’s access to U.S. institutions.
Congress has been trying to pass various versions of the BIOSECURE Act, which would limit the ability of Chinese biotechs to operate in the U.S. Some U.S. hospitals and research institutions with ties to Chinese genomics firms are under federal pressure, according to the Associated Press, though some medical professionals within the U.S. say they risk losing key research support for core medical goals. BGI told the AP that the bill is “a false flag targeting companies under the premise of national security. We strictly follow rules and laws, and we have no access to Americans’ personal data in any of our work,” it said.
U.S. intel has moved too slowly, and disrupted key spying alliances
Warner said the U.S. intelligence apparatus has moved too slowly to recognize the biotech threat. He says that intelligence agencies focus too much on foreign governments and militaries, with less attention placed on commercial technology sectors. But in a world where technology supremacy is national security, Warner says more of our intelligence efforts need to reflect this shift.
Only in the past two to three years, he says, has the U.S. seriously expanded spying into AI, semiconductors, and biotechnology. Warner says we need a more “advanced approach” in this area, and he gave as one recent example when China’s largest chipmaker SMIC stunned U.S. officials by producing a six-nanometer chip despite sweeping U.S. export controls. The breakthrough showed that Washington had underestimated both China’s technical qualities and ability to work around restrictions. “We got caught off guard with the SMIC six-nanometer chip,” Warner said.
Warner is also worried that tracking China’s tech rise requires a type of deep cooperation with U.S. allies that the Trump administration has squandered, such as the global intelligence-sharing network called the “Five Eyes” alliance.
Those relationships are now under strain, he said, and key partners including the United Kingdom, the Netherlands, and France have gone public in saying they are reluctant to share intel with the U.S. “They feel like we may be politicizing the intel product and that is not good news for America,” Warner said.
Underlying his concerns about the technology competition with China in areas including AI and biotech is the U.S. ceding the global lead in standards setting. For decades, the U.S. shaped the rules for wireless networks, satellites, and internet infrastructure. That dominance help Americans lead global markets, Warner said, but now China is aggressively positioning itself as the international standards setter.
Warner described the U.S. role in international bodies as one of the “secret sauces” in the era of America’s dominance of the global economy and technology, allowing the U.S. to leverage innovations occurring around the globe, “even if it didn’t arise in America.”
Across technology domains, influencing standards and protocols is critical to not only maintaining a competitive edge but also establishing ethical boundaries. “Will it be us or the Chinese?” Warner said. “The Chinese come in with clearly a less humanist approach. It’s been effective in lots of domains. We see it on standards-setting bodies. China floods the zone with lots of engineers, almost buying off the votes. We’ve got to reengage for American business and government,” he said.
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