Why has the tech bubble burst
With over a decade in the tech space, emNge has seen a lot of change and there were early warning signs in the tech space of over valuation and overstretching. How did we get to this point, what are the causes for the deflation of the tech bubble and are there any hopeful signs for recovery?
Ultimately it seems that a perfect storm of catalysts has combined to well and truly burst the tech bubble. Once we saw the big hitters, such as Amazon, Google and Meta, warning of cuts, the writing was on the wall. The last few years have really been a unique set of circumstances that paved the way to where we are now.
Gambling on low interest rates
It’s too simplistic to blame Russia’s invasion of Ukraine or the end of the pandemic. One thing is always certain, when interest rates are low, at some point, they will go back up. Businesses and organizations who gambled on low interest rates are now paying the price for overstretching themselves and climbing into debt.
The over valuation of the industry has played a big part in causing the tech bubble to burst with the big winners from Covid, such as Peloton and Zoom announcing big falls in sales, investor confidence in high-growth tech stock has had a big impact.
Pandemic spending gave a false picture
The pandemic era saw massive investment in digital spending and transformation across the street. This no doubt added to an over inflated valuation of tech stock but these were unique times and lacked long term sustainability. As workers, businesses and householders pushed up demand throughout this, the tech industry clearly felt growth would continue unabated but predictably demand has now slowed. The layoffs we have seen in the tech space are a result of tech companies embarking on a hiring spree and on boarding tens of thousands of staff in 2021. This took place in what was essentially a honeymoon period or halcyon days and the belief that demand of this period would continue, unabated.
Salesforce CEO, Mark Benioff, admitted recently that the rate of hiring was far greater than it should’ve been.
Inperson contact and a return to the office
The bottom line is that appetites for tech solutions however, have changed as we crave in person work and human contact. People are leaving their houses and re-entering office buildings and embracing in person interaction. With this slow but steady return to offline life,the necessity for tech solutions has diminished.
Banks failing
Last month saw the spectacular downfall of the Silicon Valley Bank As its stock plummeted over 80% and impacted Wall Street stock for banks before regulators finally closed it down. Coupled with Signature and Silvergate banks also falling, it was the culmination of a series of events that signaled the curtain call of the so-called everything bubble.
There is no doubt that the future is still bright for tech and expansion will just continue at a decreased more realistic pace. Smaller players and start-ups will make much smarter recruitment decisions, and continue the trajectory for slower sustained growth.