The era of big-tech exceptionalism may be over

In the digital world, the laws of physics can be suspended on a programmer’s whim. Equally, that world’s corporate architects have seemed able to defy economic gravity. Since 2005 the digital share of American gdp has risen by a third, to 10%. America’s tech oligopoly—Meta, Alphabet, Amazon, Microsoft and Apple (maama, if you will)—has outpaced even that breakneck growth. Collectively, maama’s revenues and profits have swelled by nearly 20% a year on average over the past decade, while America eked out nominal annual gdp growth of less than 4%. Covid-19 may have cramped physical lives, but it enriched digital ones—thereby also enriching big tech as never before.

This year gravity has asserted itself once more. The tech-heavy nasdaq index is down by a quarter since January, half as much again as America’s broader stockmarket. Profitless not-so-big tech has been dragged down by anaemic revenue growth and high interest rates, which make the far-off earnings of firms like Snap look less valuable today. More surprising, despite generating piles of cash in the here and now, the giants are also feeling the tug of reality. On July 26th Alphabet reported its slowest quarterly sales growth since the bleak early months of the pandemic. Its share price rallied, though not enough to offset recent falls and only because expectations were even worse. A day later Meta said its sales fell year on year, for the first time ever.