Shares in Facebook owner Meta fell 26 percent on Thursday US time, in what could be the worst single-day wipeout in market value for a US company, after the social media giant issued a dismal forecast, blaming Apple's privacy changes and increased competition.
The huge drop, erasing over US$200 billion ($300 billion) from Meta's market capitalisation, spilled over to the broader technology sector and dragged the Nasdaq lower.
If losses hold, a decline of this size would also mark the company's worst one-day loss since its Wall Street debut in 2012.
"Meta CEO Mark Zuckerberg may be keen to coax the world into an alternate reality, but disappointing fourth-quarter results were quick to burst his metaverse bubble," said Laura Hoy, an equity analyst at Hargreaves Lansdown.
Forbes estimates Zuckerberg's personal losses for the day at around US$28.8 billion (NZ$43 billion).
Big US tech companies have come under mounting pressure in 2022 as investors expect policy tightening at the US Federal Reserve to erode the industry's rich valuations following years of ultra-low interest rates.
The tech-dominated Nasdaq fell more than eight percent in January, its worst monthly drop since the end of 2019.
"The downgrade in the earnings outlook by Meta and other companies took markets by surprise," said Kenneth Broux, a strategist at Societe Generale in London.
"The tech selloff spilled over to broader equity markets this morning and with the Fed preparing to raise interest rates, we could see more volatility going forward," he said.
With Big Tech firms like Apple and Microsoft ballooning in valuations in the past few years, they have also become more susceptible to investor whiplash, often resulting in losses worth tens of billions of dollars in a single day of trade.
Apple shed nearly US$180 billion on September 3 2020, while Microsoft lost US$177 billion on March 16 in the same year. However, Meta's massive selloff is set to eclipse those if losses hold.
Meta reported a decline in daily active users from the previous quarter for the first time as competition with rivals like TikTok, the video sharing platform owned by China's ByteDance, heats up.
Meta said about three percent of worldwide monthly active users in the fourth quarter consisted solely of violating accounts while duplicate accounts may have represented about 11 percent of usage.
The disappointment over Meta's earnings and the subsequent stock fall raised memories of the bursting tech bubble in 2000.
Investors seem to be becoming highly selective after the sector's record-breaking run in recent months.
According to research firm Vanda, purchases from retail investors in late 2020 and early 2021 were focused on expensive tech, EVs and so-called 'meme' stocks. In the past week purchases of large-cap tech have skyrocketed while speculative assets have seen very little demand.
The so-called FAANG group of Facebook, Amazon, Apple, Netflix and Google's Alphabet has seen around US$400 billion in market capitalisation wiped off in the opening weeks of 2022 as cheaper segments of the markets become more attractive while central banks taper stimulus.
Other social media stocks were also hit hard in pre-market trading, including Twitter, Pinterest and Spotify. Spotify has been beset by a row over COVID vaccination misinformation and also released disappointing results.
Reuters / Newshub