Laid-off Silicon Valley workers are panic-selling their start-up shares as valuations plummet — here are 3 top tech stocks for 2023 that actually make money

Silicon Valley layoffs are selling their startup shares as valuations plummet — here are 3 top tech stocks for 2023 that will actually make money

Silicon Valley layoffs are selling their startup shares as valuations plummet — here are 3 top tech stocks for 2023 that will actually make money

The white collar recession is well underway.

After nearly a decade of six-figure salaries, cushy jobs and extravagant office perks, Silicon Valley firms are finally hitting back. Nearly 90,000 tech workers were laid off in 2022 alone. This year didn’t start off great either. Amazon announced 18,000 job cuts on January 5th.

Don’t miss out

And now, SEC filings show that Microsoft plans to lay off 10,000 employees by the end of the third quarter.

Things are not much better for those who have (so far) escaped the layoffs. Countless tech firms, private and public, have seen their valuations drop over the past 12 months.

And now, the Financial Times reports that a number of panicked laid-off workers are “flooding the secondary markets” with their shares of their former companies. Which means those valuations are likely to drop further.

Here’s what it could mean for your portfolio — and where you might want to turn.

Tech gets upset

Record low interest rates over the past decade have pushed more investors to seek risky investments. Loss-making technology companies were, perhaps, the riskiest place for this extra money. Tech valuations have risen since 2020, allowing startups and tech giants to use their inflated stock as a way to retain talent.

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Tech workers were paid excessive amounts of stock-based compensation. In fact, some companies like Snap and Pinterest paid up to 46% of their total compensation in the form of stock options. This boosted total tech worker compensation during the boom, but is now having the opposite effect as valuations decline.

The Invesco QQQ Trust (NASDAQ:QQQ) – a fund that tracks technology stocks – is down 22.7% over the past 12 months. Meanwhile, private companies also saw their valuation drop by up to 80%. Employees of these firms are rushing to make money in secondary markets, according to a recent Financial Times report.

Companies struggling to generate profits have been the biggest losers so far. An index of loss-making firms compiled by Morgan Staney fell 54% over the past year. Many of these money-losing firms have seen their valuations settle at pre-pandemic levels.

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Looking ahead, some experts believe that valuations will not recover until the Federal Reserve turns on its interest rate strategy. Lower or stable interest rates can make risky technology stocks more attractive. However, this is unlikely to happen until late 2023 at the earliest, depending on interest rate swaps.

Until then, investors should probably focus on highly profitable tech companies that have been unfairly punished during this crash.

Adobe

Adobe (NASDAQ:ADBE) has lost 31% of its value over the past year. The company underperformed the broader market by a wide margin. However, its underlying business is still good.

The company reported $17.61 billion in revenue for fiscal year 2022 – 12% higher than the previous year. And in September, the company acquired the Figma design platform, which expands Adobe’s suite of essential designer tools.

The company is also getting involved in the coming Artificial Intelligence boom by tracking the way its users use essential tools and integrating OpenAI tools with Figma.

The stock trades at a price-to-earnings ratio of 33.9.

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Microsoft

Microsoft (NASDAQ:MSFT) is also getting involved in the AI ​​boom. The company was an early investor in OpenAI and now has access to ChatGPT for its Bing search engine. The integration could be completed by early this year, which means the online search market is on the brink of disruption.

But none of this is reflected in the stock price. Microsoft has lost 21% of its value over the past year. It is now trading at just 24.5 times net earnings per share.

Apple

The most profitable technology company in the world definitely deserves a mention in this list. Apple (NASDAQ:AAPL) delivered $6.11 in earnings per share in its most recent quarter — up 9% from a year earlier. This year, the company is expected to launch a new virtual reality headset and continue the migration of its supply chain from China to India.

Apple stock trades at 21 times earnings, making it an ideal target for investors in 2023.

What to read next

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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