Stocks Are Down, and the Tech Industry Takes a Weird Turn

(Bloomberg) -- This was supposed to be tech’s year. It was supposed to be the year that animal spirits took hold and the IPO window opened. It was supposed to be the year tax repatriation fueled an M&A bonanza. And it looked like it would be another year where the tech’s Frightful Five soared, crushing also-ran tech stocks under their weight.

This week's correction—the S&P 500 and NASDAQ are both down about 10 percent from their record highs—has thrown everything into question.

It could very well be a blip. I have no idea. Don’t come to me for macroeconomic prophecies. The stock markets have been whipsawing, rising and falling more than 1,000 points in single days of trading. Just looking at the charts, it seems obvious that the market was due for some kind of drop after a nearly unbroken march upward last year. All was well. Banks had grown so confident that Credit Suisse Group AG was placing big bets that the markets would remain calm.

Then last Friday, the market dropped off a cliff. Then came back a bit. And fell some more.

The party might not be over, but the dean just came by and told everyone to quiet down. And now, a lot of weird things are happening. I can’t tell how they all fit together.

Yesterday, Qualcomm rejected Broadcom’s purportedly final $121 billion takeover offer, possibly scuttling the largest technology takeover bid in history. (As an independent company, Qualcomm’s enterprise value is $75 billion.) The offer was a 17 percent premium over an earlier proposal.

Perhaps most perplexing of all is the rise of Snap Inc., Twitter Inc. and even Blue Apron Holdings Inc. when most other stocks are falling.

Snap’s shares climbed above the initial public offering price for the first time since July, jumping 39 percent from the close of trading Tuesday. Snap reported financial results, which showed that it had cut losses, so the move wasn’t without explanation. But it wasn’t alone.

Twitter and Blue Apron slightly beat expectations and saw their stocks climb. Since Tuesday, Blue Apron is up 20 percent. Twitter closed Thursday up 12 percent after its quarterly report. It was a welcome trio of reversals amid disarray. All the top tech stocks fell this week. (Beleaguered GoPro Inc. sadly missed out on the mid-cap tech stock party.)

Although things are a little freaky right now, companies will still have cash to spend and stock to swap. Animal spirits act of their own accord. There’s a backlog of prospective public companies, even if SoftBank Group Corp. offers many a potential out. What this week means for the relative appetite for smaller tech stocks will take more than a few days to sort out.

For now, I must as usual turn to Lewis Carroll: “I’m afraid I can’t explain myself, sir. Because I am not myself, you see?”

This article also ran in Bloomberg Technology’s Fully Charged newsletter. Sign up here.

And here’s what you need to know in global technology news

As professional gaming grows, Japan changes its law. Old gambling laws had prohibited people from making money playing video games. (But Japan is less supportive of cryptocurrency mania.)

I can’t do a better job selling the story than this headline: Silicon Valley Has Developed a $300 Million Foot Fetish

GrubHub’s drivers are independent contractors. And that’s good news for Uber.

Someday we’ll reminisce about the days before our beds lectured us about our sleeping habits.

To contact the author of this story: Eric Newcomer in San Francisco at enewcomer@bloomberg.net.

To contact the editor responsible for this story: Mark Milian at mmilian@bloomberg.net.

©2018 Bloomberg L.P.