Something Wicked This Way Comes for Tech

For tech stocks, the end of days may be here, or near. Or maybe it’s just a shoe that needed to drop.

Regardless of your opinion, no one can accuse the stock markets of having a long memory. Why, it was only yesterday that the rally had begun. And as of this writing, on Wednesday (Jan. 20), with just a few hours to come into the close, tech stocks are down more than 2.3 percent.

The obvious culprits are getting slammed, but among the most notable bloodletters are a number of eCommerce and payments plays. Yahoo is off 6 percent, with peers such as Alibaba down roughly the same amount, and JD.com the same. (Hey, didn’t we tell you today that eCommerce is this year’s big short?)

Even Square, which had clawed its way higher in recent months from its IPO level, which had been a disappointment, is now in disappointment range again, having broken its IPO boundary to trade at $9 and dipping as low as $8.27. That name is down roughly a third just in 2016 to date.

If you are a short seller, these are days of heaven. If you are not in the market, these are days of relief. If you are among the tech stocks that are supposed to revolutionize the way we shop and pay, when and where, you may be hoping for a miracle.

Square may be an anomaly in all of the above pantheon, as a young company that has a nice top line trajectory, but losses that may be moving in lockstep. There’s also what looks to be the “Dorsey discount” as investors remain hesitant about the dual roles the CEO has taken at Square and Twitter. Square may be punished for its peculiarities of leadership structure, but behind the selloff lies something deeper, namely that investors fear that the technology of mobile payments may indeed change the game, but maybe not fast enough to hit the bottom line and transform it from red to black.

The road to stock market riches is littered with gamechangers who failed to sustain and thrive amid the vagaries of capital raising and stock market panics; the innovation became almost secondary.

The others, well, they have established presence globally and profits to show. But all are getting tarred and feathered with the same rush on Wednesday as China concerns continue.

The read across from tech firms up and down the tech supply chain presages some trouble ahead. Consider the fact that IBM beat but gave soft guidance. Consider the fact that Micron, a key component maker is down as chip prices are down, and Samsung gave rough nods to component demands, too. Connecting the dots here, we might surmise that hardware is in for a tumble, and working down the line of logic (not the chip kind), we know that fewer devices in fewer hands means less payment adoption, or at least more slowly than people had thought would happen. Yahoo and Alibaba are directly China related; the others hint at something more far-reaching. And that should keep you up tonight right into the next roller coaster.