• Stephanie Palazzolo wrote on Twitter that it was disorienting to see tech layoffs and then to see US job numbers increase and unemployment drop to its lowest level in 50 years.
• The four horsemen of the tech recession are the COVID hangover, the hardware cycle, Apple’s App Tracking Transparency, and the end of zero interest rates.
• The COVID hangover is the single biggest issue facing tech companies, as consumers with no way to spend discretionary income and flush with stimulus checks bought new devices, subscribed to streaming services, and used cloud computing.
• The hardware cycle is impacting companies like Apple, Microsoft, and Intel, as well as TSMC, as production slowdowns and pent-up demand for Apple Silicon-based processors have caused revenue to drop.
• Apple’s App Tracking Transparency has caused a decrease in ad revenue for many tech companies, as users opt out of tracking.
• The end of zero interest rates has caused tech companies to re-evaluate their investments, as the cost of capital has increased.
• The COVID hangover refers to the inevitable slowdown in tech sales after the initial surge due to the pandemic.
• The end of zero interest rates refers to investors realizing that the cost of capital input in their equations can be something other than zero, and the price they are wiling to pay for growth without profitability is falling through the floor.
• The ATT recession refers to Apple’s App Tracking Transparency (ATT) initiative, which fundamentally disrupts the “hub-and-spoke” model of digital advertising, leading to a crash in revenue growth for companies that rely on performance marketing.
• The article argues that the impact of ATT has been underestimated, and that ascribing the advertising revenue headwinds to macroeconomic factors is misguided.