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  • At 50, Hello Kitty is as ‘kawaii’ and lucrative as ever

    At 50, Hello Kitty is as ‘kawaii’ and lucrative as ever

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    TOKYO (AP) — Hello Kitty turns 50 on Friday. Befitting a pop icon at midlife, the bubble-headed, bow-wearing character’s fictional birthday has brought museum exhibits, a theme park spectacle and a national tour. And that’s just in Japan, her literal birthplace but not the one listed in her official biography.

    Confused? Welcome to the party. If there’s one thing about Hello Kitty, it’s that she’s proven adaptable and as much a study in contrasts during her long career. She — and Kitty is a she, according to the company that owns her — may have been conceived as a vessel for the feelings of others, but some women see an empowering symbol in her mouthless face.

    “Shrewd” is how Mika Nishimura, a design professor at Tokyo’s Meisei University, describes the way Hello Kitty conquered the worlds of commerce, fashion and entertainment. As a tabula rasa open to interpretation, the non-threatening creation was the perfect vehicle for making money, she said.

    “American feminists have said she doesn’t say anything and acquiesces to everyone. But in Japan, we also see how she may appear happy if you’re happy, and sad if you’re feeling sad,” Nishimura told The Associated Press. “It’s a product strategy that’s sheer genius. By being so adaptable, Kitty gets all those collaborative deals.”

    The character’s semicentennial is evidence of that. Sanrio, the Japanese entertainment company that holds the rights to Hello Kitty’s name and image, kicked off the festivities a year ago with an animation account on TikTok, Roblox games and an avatar for the social networking app Zepeto.

    There have been anniversary editions of merchandise ranging from pet collars, cosmetics and McDonald’s Happy Meals to Crocs and a Baccarat crystal figurine. A gold coin pendant with the image of Hello Kitty holding the number 50 is selling for about 120,000 yen ($800), while a Casio watch costs 18,700 yen ($120).

    But first, more on the origin story.

    Unlike Mickey Mouse and Snoopy, Hello Kitty didn’t start as a cartoon. A young Sanrio illustrator named Yuko Shimizu drew her in 1974 as a decoration for stationery, tote bags, cups and other small accessories. The design made its debut on a coin purse the next year and became an instant hit in Japan.

    As Hello Kitty’s commercial success expanded beyond Asia, so did her personal profile. By the late 1970s, Sanrio revealed the character’s name as Kitty White, her height as five apples tall and her birthplace as suburban London, where the company said she lived with her parents and twin sister Mimmy.

    “The main theme of Hello Kitty is friendship. When I first created it, I made a family of which Kitty was a part. But then Hello Kitty started to appear in other settings as the character grew,” Shimizu told the BBC in June. “Sanrio put a lot of effort into building the brand into what it is today.”

    At some point, Sanrio designated Kitty’s birthday as Nov. 1, the same as Shimizu’s. Her background was embellished with hobbies that included playing piano, reading and baking. Her TV appearances required co-stars, including a pet cat named Charmmy Kitty that made its debut 20 years ago.

    But Hello Kitty’s 40th birthday brought an update that astonished fans. Sanrio clarified to a Los Angeles museum curator that Kitty, despite her feline features, was a little girl. A company spokesperson repeated the distinction this year, renewing debate online about the requirements for being considered human.

    “She is supposed to be Kitty White and English. But this is part of the enigma: Who is Hello Kitty? We can’t figure it out. We don’t even know if she is a cat,” art historian Joyce S. Cheng, a University of Oregon associate professor, said. “There is an unresolved indeterminacy about her that is so amazing.”

    Part of the confusion stems from a misunderstanding of “kawaii,” which is Japanese for “cute” but also connotes a lovable or adorable essence. Sanrio recruited Shimizu and other illustrators to create “kawaii” characters at a time when cute, girlish styles were popular in Japan. But the word is used often in Japanese society, and not only to describe babies and puppies.

    An elderly man, something as innocuous as an umbrella, a subcompact car or a kitchen utensil, or even a horror movie monster can get labeled “kawaii.” By Western standards, the idea may seem embarrassingly frivolous. But it’s taken seriously in Japan, where the concept is linked with the most honorable instincts.

    The complexity of “kawaii” may help explain Hello Kitty’s enduring appeal across generations and cultures, why Canadian singer-songwriter Avril Lavigne released a song titled “Hello Kitty” a decade ago, and why Britain’s King Charles wished Hello Kitty a happy 50th birthday when he hosted Japan’s Emperor Naruhito and Empress Masako at Buckingham Palace in June.

    Although Hello Kitty may seem to embody the self-sacrificing woman stereotype, it’s revealing that three women have served as the character’s chief designers at Sanrio. Yuko Yamaguchi, who has held the role since 1980, is credited with keeping the character both modern and timeless, giving Kitty black outfits or false eyelashes as trends dictated but never removing the bow from her left ear.

    “Hello Kitty, this cultural object, has something to tell us about the history of women in East Asia, and how East Asian women modernized themselves and became professional citizens in a modern society,” the University of Oregon’s Cheng said.

    Sanrio has come up with hundreds of creatures, all adorable and cuddly, but none with the lasting power of Hello Kitty. Forget the understated wabi-sabi aesthetic historically associated with Japan. A chameleon-like cat-girl who reflects unabashed kitsch is the cultural ambassador of a consumer-crazed, happy-go-lucky nation.

    “It’s the anti-wabi sabi, wanting to be as flashy and as bling-bling as possible, like Lady Gaga. In your face, but that’s actually part of the genius, too. It’s powerful,” Cheng said.

    Leslie Bow, a professor of English and Asian American Studies at the University of Wisconsin-Madison, said that while many Asian and Asian American women see Hello Kitty as a symbol of defiance, the protective, caretaking instinct aroused by “kawaii” isn’t without power.

    “We take care of our siblings, our babies, our pets, because we are in control. We control their actions. And so that is also the dark side of cute,” Bow said.

    Sanrio has taken advantage of the character’s adaptability by allowing relatively unrestricted use of her image in return for a licensing fee.

    Image

    A visitor wears boots featuring Hello Kitty at the National Museum during the exhibition “As I change, so does she,” marking the 50th anniversary of Hello Kitty at the Tokyo National Museum in Tokyo Wednesday, Oct. 30, 2024. (AP Photo/Shuji Kajiyama)

    Image

    Visitors react to gigantic Hello Kitty slippers at the exhibition “As I change, so does she,” marking the 50th anniversary of Hello Kitty at the Tokyo National Museum in Tokyo Wednesday, Oct. 30, 2024. (AP Photo/Shuji Kajiyama)

    Just about anything goes for the wee whiskered one, from a growing global empire of Sanrio-sanctioned Hello Kitty cafes to an “augmented reality” cellphone app that shows Kitty dancing in front of the Eiffel Tower in Paris, London’s Big Ben and other tourist landmarks.

    On the unsanctioned side, Hello Kitty even has shown up on guns and vibrators.

    During a presentation earlier this year in Seoul, Hello Kitty designer Yamaguchi said one of her unfulfilled goals was finding a way “to develop a Hello Kitty for men to fall in love with as well.” But she’s still working on it.

    “I am certain the day will come when men are no longer embarrassed to carry around Hello Kitty,” entertainment news site Content Asia quoted Yamaguchi as saying.

    ___

    Leff reported from London. Berenice Bautista in Mexico City contributed reporting.

    Yuri Kageyama is on X: https://x.co/yurikageyama

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  • Goldman calls this options trading strategy ‘systematically profitable’

    Goldman calls this options trading strategy ‘systematically profitable’

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  • U.S. stocks struggle for direction as traders digest inflation data in April

    U.S. stocks struggle for direction as traders digest inflation data in April

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    U.S. stock indexes were little changed in choppy trade on Wednesday after data showed U.S. consumer price inflation cooled to the lowest annul rate in two years in April, though the core inflation, which excludes food and energy prices, remained high.

    How are stock-indexes trading

    On Tuesday, the Dow Jones Industrial Average fell 57 points, or 0.17%, to 33562, the S&P 500 declined 19 points, or 0.46%, to 4119, and the Nasdaq Composite dropped 77 points, or 0.63%, to 12180.

    What’s driving markets

    Stocks…

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  • Stocks making the biggest moves midday: Tesla, First Republic, KeyCorp, UBS and more

    Stocks making the biggest moves midday: Tesla, First Republic, KeyCorp, UBS and more

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    Image taken with a drone) A Tesla collision center is seen in this aerial view in Orlando.

    Paul Hennessy | Lightrocket | Getty Images

    Check out the companies making headlines in midday trading Tuesday.

    Tesla — Shares popped 5% after Moody’s upgraded Tesla to Baa3 rating from its junk-rated credit. Moody’s called the electric-vehicle maker the “foremost manufacturers of battery electric vehicles” and said the upgrade reflects Tesla’s prudent financial policy and management’s operational track record.

    First Republic, KeyCorp, U.S. Bancorp — Regional bank stocks rebounded on Tuesday as Treasury Secretary Janet Yellen said the government would consider backstopping deposits at more banks in order to protect the financial system. Shares of First Republic jumped more than 41%, while KeyCorp added 9%. U.S. Bancorp rose nearly 8%.

    JPMorgan, Bank of America — Shares of larger U.S. banks rose on Tuesday as investors showed increased optimism after Yellen’s remarks. JPMorgan gained about 3% and Bank of America rose by 3.5%. 

    Foot Locker — Foot Locker gained 6% after Citi upgraded the retail stock to a buy from neutral after its investor day on Monday. The firm said the company’s move away from malls and toward digital, kids and loyalty projects is a step in the right direction.

    Harley-Davidson — Shares of Harley-Davidson rose more than 5% after Morgan Stanley upgraded the motorcycle maker and said its focus on its core business can lift the stock by more than 30%. Jefferies also upgraded the stock, saying the company’s risk and reward are more balanced after a recent decline.

    UBS — U.S.-listed shares of the Swiss-based bank gained 12% during midday trading following its agreement over the weekend to buy Credit Suisse for $3.2 billion. Credit Suisse rose 5% after taking a nearly 53% plunge on Monday.

    Roblox — Shares rose more than 3% after D.A. Davidson said the online game platform has an “underappreciated” opportunity in artificial intelligence.

    Emerson Electric — Shares added nearly 2% after Morgan Stanley said shares of the multinational tech company are too attractive to ignore. The firm upgraded the stock to overweight from equal weight.

    Exxon Mobil — The oil and gas giant’s stock price gained 3% after Morgan Stanley said it likes the company’s robust “competitive positioning.”

    — CNBC’s Alex Harring, Jesse Pound, Tanaya Macheel and Michelle Fox Theobald contributed reporting.

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  • Dow suffers worst week since June as U.S. stocks end sharply lower after employment report, banking sector fears

    Dow suffers worst week since June as U.S. stocks end sharply lower after employment report, banking sector fears

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    U.S. stocks ended sharply lower Friday as investors parsed mixed signals from the February jobs report amid ongoing concerns about contagion in the banking sector from the troubles at Silicon Valley Bank.

    How stocks traded
    • The Dow Jones Industrial Average
      DJIA,
      -1.07%

      dropped 345.22 points, or 1.1%, to close at 31,909.64, its fourth straight day of declines for its longest losing streak since December.

    • The S&P 500
      SPX,
      -1.45%

      fell 56.73 points, or 1.4%, to finish at 3,861.59.

    • Nasdaq Composite
      COMP,
      -1.76%

      sank 199.47 points, or 1.8%, to end at 11,138.89.

    For the week, the Dow sank 4.4%, S&P 500 dropped 4.5% and the Nasdaq shed 4.7%, according to Dow Jones Market Data. The Dow booked its worst week since June, the S&P 500 saw its biggest weekly percentage decline since September, and the Nasdaq had its biggest percentage slide since November.

    What drove markets

    U.S. stocks slumped amid investor concerns about the banking sector after the closure of Silicon Valley Bank by the Federal Deposit Insurance Corp and in the wake of the monthly employment report released Friday.

    In a sign of investor anxiety, the CBOE Volatility Index
    VIX,
    +9.69%

    was up Friday afternoon at almost 25, after jumping Thursday, according to FactSet data, last check.

    “Bears came out of hibernation this week after waking up to a warning shot from the banking space,” said Adam Turnquist, chief technical strategist for LPL Financial, in emailed comments Friday, pointing to the collapse of Silicon Valley Bank.

    Silicon Valley Bank was closed Friday by the California Department of Financial Protection and Innovation. The Federal Deposit Insurance Corp. was appointed receiver, with the bank becoming the first FDIC-backed institution to fail this year.

    Read: Bank ETFs fall amid concerns over SVB and ‘crack’ in financial system after rate hikes

    The SPDR S&P Regional Banking ETF
    KRE,
    -4.39%

    was down more than 4% Friday afternoon, FactSet data show, while shares of Bank of America Corp.
    BAC,
    -0.88%

    closed 0.9% lower, Citigroup Inc.
    C,
    -0.53%

    slid 0.5% and JPMorgan Chase & Co.
    JPM,
    +2.54%

    rose 2.5%.

    Worries over the banking sector are “probably overshadowing” the positive aspects of the employment report, said Karim El Nokali, investment strategist at Schroders, in a phone interview Friday.

    The U.S. employment report for February showed the labor market continued to grow at a robust pace last month, with the U.S. economy adding 311,000 jobs, more than the 225,000 that economists polled by the Wall Street Journal had expected.

    But “if you dig a little deeper” into the report, average hourly earnings came in “a little lighter than expected” while labor-force participation ticked up, which are positive developments from an inflation standpoint, said El Nokali.

    Average hourly wages grew by 0.2%, a slower rate than the 0.3% rate economists had expected. It was also less than the 0.3% increase in January. The unemployment rate ticked higher to 3.6%, helped by an increase in the labor-force participation rate.

    “On the margin,” said El Nokali, the employment report was “positive for the equity market.” He said it would “probably argue more” for the Federal Reserve to raise its benchmark rate by 25 basis points at its policy meeting later this month, as opposed to a 50-basis-point hike that investors had been fearing leading up to the employment data.

    See: Jobs report shows strong 311,000 gain in February, puts pressure on Fed for bigger rate hike

    Fed Chair Jerome Powell said earlier this week that the “totality” of jobs and inflation data would determine whether the central bank would go back to raising its policy interest rate by another 50 basis points at its meeting later in March.

    After climbing earlier in the week, odds of a 50-basis-point rate hike by the Fed have moderated over the past 24 hours. Traders now see a 62% chance of the central bank raising its benchmark rate by 25 basis points, according to the CME FedWatch Tool.

    Meanwhile, Treasury yields sank Friday.

    The yield on the 2-year Treasury note
    TMUBMUSD02Y,
    4.594%

    dropped 31.4 basis points to 4.586%, while the 10-year Treasury yields fell 22.8 basis points to 3.694%, according to Dow Jones Market Data. The Treasury yield curve remains massively inverted, which has contributed to banks’ woes.

    Companies in focus

    —Steve Goldstein contributed to this report.

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  • The tech IPO market collapsed in 2022, and next year doesn’t look much better

    The tech IPO market collapsed in 2022, and next year doesn’t look much better

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    The Nasdaq MarketSite in New York.

    Michael Nagle | Bloomberg | Getty Images

    Following a record-smashing tech IPO year in 2021 that featured the debuts of electric car maker Rivian, restaurant software company Toast, cloud software vendors GitLab and HashiCorp and stock-trading app Robinhood, 2022 has been a complete dud.

    The only notable tech offering in the U.S. this year was Intel’s spinoff of Mobileye, a 23-year-old company that makes technology for self-driving cars and was publicly traded until its acquisition in 2017. Mobileye raised just under $1 billion, and no other U.S. tech IPO pulled in even $100 million, according to FactSet.

    related investing news

    CNBC Pro

    In 2021, by contrast, there were at least 10 tech IPOs in the U.S. that raised $1 billion or more, and that doesn’t account for the direct listings of Roblox, Coinbase and Squarespace, which were so well-capitalized they didn’t need to bring in outside cash.

    The narrative completely flipped when the calendar turned, with investors bailing on risk and the promise of future growth, in favor of profitable businesses with balance sheets deemed strong enough to weather an economic downturn and sustained higher interest rates. Pre-IPO companies altered their plans after seeing their public market peers plunge by 50%, 60%, and in some cases, more than 90% from last year’s highs.

    In total, IPO deal proceeds plummeted 94% in 2022 — from $155.8 billion to $8.6 billion — according to Ernst & Young’s IPO report published in mid-December. As of the report’s publication date, the fourth quarter was on pace to be the weakest of the year.

    With the Nasdaq Composite headed for its steepest annual slump since 2008 and its first back-to-back years underperforming the S&P 500 since 2006-2007, tech investors are looking for signs of a bottom.

    But David Trainer, CEO of stock research firm New Constructs, says investors first need to get a grip on reality and get back to valuing emerging tech companies based on fundamentals and not far-out promises.

    As tech IPOs were flying in 2020 and 2021, Trainer was waving the warning flag, putting out detailed reports on software, e-commerce and tech-adjacent companies that were taking their sky-high private market valuations to the public markets. Trainer’s calls appeared comically bearish when the market was soaring, but many of his picks look prescient today, with Robinhood, Rivian and Sweetgreen each down at least 85% from their highs last year.

    “Until we see a persistent return to intelligent capital allocation as the primary driver of investment decisions, I think the IPO market will struggle,” Trainer said in an email. “Once investors focus on fundamentals again, I think the markets can get back to doing what they are supposed to do: support intelligent allocation of capital.”

    Lynn Martin, president of the New York Stock Exchange, told CNBC’s “Squawk on the Street” last week that she’s “optimistic about 2023” because the “backlog has never been stronger,” and that activity will pick up once volatility in the market starts to dissipate.

    NYSE president very optimistic about 2023 public listings: 'Backlogs never been stronger'

    Hangover from last year’s ‘binge drinking’

    For companies in the pipeline, the problem isn’t as simple as overcoming a bear market and volatility. They also have to acknowledge that the valuations they achieved from private investors don’t reflect the change in public market sentiment.

    Companies that were funded over the past few years did so at the tail end of an extended bull run, during which interest rates were at historic lows and tech was driving major changes in the economy. Facebook’s mega IPO in 2012 and the millionaires minted by the likes of Uber, Airbnb, Twilio and Snowflake recycled money back into the tech ecosystem.

    Venture capital firms, meanwhile, raised ever larger funds, competing with a new crop of hedge funds and private equity firms that were pumping so much money into tech that many companies were opting to stay private for longer than they otherwise would.

    Money was plentiful. Financial discipline was not.

    In 2021, VC firms raised $131 billion, topping $100 billion for the first time and marking a second straight year over $80 billion, according to the National Venture Capital Association. The average post-money valuation for VC deals across all stages rose to $360 million in 2021 from about $200 million the prior year, the NVCA said.

    Those valuations are in the rearview mirror, and any companies who raised during that period will have to face up to reality before they go public.

    Some high-valued late-stage startups have already taken their lumps, though they may not be dramatic enough.

    Stripe cut its internal valuation by 28% in July, from $95 billion to $74 billion, the Wall Street Journal reported, citing people familiar with the matter. Checkout.com slashed its valuation this month to $11 billion from $40 billion, according to the Financial Times. Instacart has taken a hit three times, reducing its valuation from $39 billion to $24 billion in May, then to $15 billion in July, and finally to $13 billion in October, according to The Information.

    Klarna, a provider of buy now, pay later technology, suffered perhaps the steepest drop in value among big-name startups. The Stockholm-based company raised financing at a $6.7 billion valuation this year, an 85% discount to its prior valuation of $46 billion.

    “There was a hangover from all the binge drinking in 2021,” said Don Butler, managing director at Thomvest Ventures.

    Butler doesn’t expect the IPO market to get appreciably better in 2023. Ongoing rate hikes by the Federal Reserve are looking more likely to tip the economy into recession, and there are no signs yet that investors are excited to take on risk.

    “What I’m seeing is that companies are looking at weakening b-to-b demand and consumer demand,” Butler said. “That’s going to make for a difficult ’23 as well.”

    Butler also thinks that Silicon Valley has to adapt to a shift away from the growth-first mindset before the IPO market picks up again. That not only means getting more efficient with capital, showing a near-term path to profitability, and reining in hiring expectations, but also requires making structural changes to the way organizations run.

    For example, startups have poured money into human resources in recent years to handle the influx in people and the aggressive recruiting across the industry. There’s far less need for those jobs during a hiring freeze, and in a market that’s seen 150,000 job cuts in 2022, according to tracking website Layoffs.fyi.

    Butler said he expects this “cultural reset” to take a couple more quarters and said, “that makes me remain pessimistic on the IPO market.”

    Cash is king

    One high-priced private company that has maintained its valuation is Databricks, whose software helps customers store and clean up data so employees can analyze and use it.

    Databricks raised $1.6 billion at a $38 billion valuation in August of 2021, near the market’s peak. As of mid-2021, the company was on pace to generate $1 billion in annual revenue, growing 75% year over year. It was on everybody’s list for top IPO candidates coming into the year.

    Databricks CEO Ali Ghodsi isn’t talking about an IPO now, but at least he’s not expressing concerns about his company’s capital position. In fact, he says being private today plays to his advantage.

    “If you’re public, the only thing that matters is cash flow right now and what are you doing every day to increase your cash flow,” Ghodsi told CNBC. “I think it’s short-sighted, but I understand that’s what markets demand right now. We’re not public, so we don’t have to live by that.”

    Ghodsi said Databricks has “a lot of cash,” and even in a “sky is falling” scenario like the dot-com crash of 2000, the company “would be fully financed in a very healthy way without having to raise any money.”

    Snowflake shares in 2022

    CNBC

    Databricks has avoided layoffs and Ghodsi said the company plans to continue to hire to take advantage of readily available talent.

    “We’re in a unique position, because we’re extremely well-capitalized and we’re private,” Ghodsi said. “We’re going to take an asymmetric strategy with respect to investments.”

    That approach may make Databricks an attractive IPO candidate at some point in the future, but the valuation question remains a lingering concern.

    Snowflake, the closest public market comparison to Databricks, has lost almost two-thirds of its value since peaking in November 2021. Snowflake’s IPO in 2020 was the largest ever in the U.S. for a software company, raising almost $3.9 billion.

    Snowflake’s growth has remained robust. Revenue in the latest quarter soared 67%, beating estimates. Adjusted profit was also better than expectations, and the company said it generated $65 million in free cash flow in the quarter.

    Still, the stock is down almost 20% in the fourth quarter.

    “The sentiment in the market is a little stressed out,” Snowflake CEO Frank Slootman told CNBC’s Jim Cramer after the earnings report on Nov. 30. “People react very strongly. That’s understood, but we live in the real world, and we just go one day at a time, one quarter at a time.”

    — CNBC’s Jordan Novet contributed to this report.

    WATCH: Snowflake CEO on the company’s light guidance

    Snowflake CEO on the company's light guidance

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  • Tech’s reality check: How the industry lost $7.4 trillion in one year

    Tech’s reality check: How the industry lost $7.4 trillion in one year

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    Pedestrians walk past the NASDAQ MarketSite in New York’s Times Square.

    Eric Thayer | Reuters

    It seems like an eternity ago, but it’s just been a year.

    At this time in 2021, the Nasdaq Composite had just peaked, doubling since the early days of the pandemic. Rivian’s blockbuster IPO was the latest in a record year for new issues. Hiring was booming and tech employees were frolicking in the high value of their stock options.

    Twelve months later, the landscape is markedly different.

    Not one of the 15 most valuable U.S. tech companies has generated positive returns in 2021. Microsoft has shed roughly $700 billion in market cap. Meta’s market cap has contracted by over 70% from its highs, wiping out over $600 billion in value this year.

    In total, investors have lost roughly $7.4 trillion, based on the 12-month drop in the Nasdaq.

    Interest rate hikes have choked off access to easy capital, and soaring inflation has made all those companies promising future profit a lot less valuable today. Cloud stocks have cratered alongside crypto.

    There’s plenty of pain to go around. Companies across the industry are cutting costs, freezing new hires, and laying off staff. Employees who joined those hyped pre-IPO companies and took much of their compensation in the form of stock options are now deep underwater and can only hope for a future rebound.

    IPOs this year slowed to a trickle after banner years in 2020 and 2021, when companies pushed through the pandemic and took advantage of an emerging world of remote work and play and an economy flush with government-backed funds. Private market darlings that raised billions in public offerings, swelling the coffers of investment banks and venture firms, saw their valuations marked down. And then down some more.

    Rivian has fallen more than 80% from its peak after reaching a stratospheric market cap of over $150 billion. The Renaissance IPO ETF, a basket of newly listed U.S. companies, is down 57% over the past year.

    Tech executives by the handful have come forward to admit that they were wrong.

    The Covid-19 bump didn’t, in fact, change forever how we work, play, shop and learn. Hiring and investing as if we’d forever be convening happy hours on video, working out in our living room and avoiding airplanes, malls and indoor dining was — as it turns out — a bad bet.

    Add it up and, for the first time in nearly two decades, the Nasdaq is on the cusp of losing to the S&P 500 in consecutive years. The last time it happened the tech-heavy Nasdaq was at the tail end of an extended stretch of underperformance that began with the bursting of the dot-com bubble. Between 2000 and 2006, the Nasdaq only beat the S&P 500 once.

    Is technology headed for the same reality check today? It would be foolish to count out Silicon Valley or the many attempted replicas that have popped up across the globe in recent years. But are there reasons to question the magnitude of the industry’s misfire?

    Perhaps that depends on how much you trust Mark Zuckerberg.

    Meta’s no good, very bad, year

    It was supposed to be the year of Meta. Prior to changing its name in late 2021, Facebook had consistently delivered investors sterling returns, beating estimates and growing profitably with historic speed.

    The company had already successfully pivoted once, establishing a dominant presence on mobile platforms and refocusing the user experience away from the desktop. Even against the backdrop of a reopening world and damaging whistleblower allegations about user privacy, the stock gained over 20% last year.

    But Zuckerberg doesn’t see the future the way his investors do. His commitment to spend billions of dollars a year on the metaverse has perplexed Wall Street, which just wants the company to get its footing back with online ads.

    The big and immediate problem is Apple, which updated its privacy policy in iOS in a way that makes it harder for Facebook and others to target users with ads.

    With its stock down by two-thirds and the company on the verge of a third straight quarter of declining revenue, Meta said earlier this month it’s laying off 13% of its workforce, or 11,000 employees, its first large-scale reduction ever.

    “I got this wrong, and I take responsibility for that,” Zuckerberg said.

    Mammoth spending on staff is nothing new for Silicon Valley, and Zuckerberg was in good company on that front.

    Software engineers had long been able to count on outsized compensation packages from major players, led by Google. In the war for talent and the free flow of capital, tech pay reached new heights.

    Recruiters at Amazon could throw more than $700,000 at a qualified engineer or project manager. At gaming company Roblox, a top-level engineer could make $1.2 million, according to Levels.fyi. Productivity software firm Asana, which held its stock market debut in 2020, has never turned a profit but offered engineers starting salaries of up to $198,000, according to H1-B visa data.

    Fast forward to the last quarter of 2022, and those halcyon days are a distant memory.

    Layoffs at Cisco, Meta, Amazon and Twitter have totaled nearly 29,000 workers, according to data collected by the website Layoffs.fyi. Across the tech industry, the cuts add up to over 130,000 workers. HP announced this week it’s eliminating 4,000 to 6,000 jobs over the next three years.

    For many investors, it was just a matter of time.

    “It is a poorly kept secret in Silicon Valley that companies ranging from Google to Meta to Twitter to Uber could achieve similar levels of revenue with far fewer people,” Brad Gerstner, a tech investor at Altimeter Capital, wrote last month.

    Gerstner’s letter was specifically targeted at Zuckerberg, urging him to slash spending, but he was perfectly willing to apply the criticism more broadly.

    “I would take it a step further and argue that these incredible companies would run even better and more efficiently without the layers and lethargy that comes with this extreme rate of employee expansion,” Gerstner wrote.

    Microsoft's president responds to big tech layoffs

    Activist investor TCI Fund Management echoed that sentiment in a letter to Google CEO Sundar Pichai, whose company just recorded its slowest growth rate for any quarter since 2013, other than one period during the pandemic.

    “Our conversations with former executives suggest that the business could be operated more effectively with significantly fewer employees,” the letter read. As CNBC reported this week, Google employees are growing worried that layoffs could be coming.

    SPAC frenzy

    Remember SPACs?

    Those special purpose acquisition companies, or blank-check entities, created so they could go find tech startups to buy and turn public were a phenomenon of 2020 and 2021. Investment banks were eager to underwrite them, and investors jumped in with new pools of capital.

    SPACs allowed companies that didn’t quite have the profile to satisfy traditional IPO investors to backdoor their way onto the public market. In the U.S. last year, 619 SPACs went public, compared with 496 traditional IPOs.

    This year, that market has been a bloodbath.

    The CNBC Post SPAC Index, which tracks the performance of SPAC stocks after debut, is down over 70% since inception and by about two-thirds in the past year. Many SPACs never found a target and gave the money back to investors. Chamath Palihapitiya, once dubbed the SPAC king, shut down two deals last month after failing to find suitable merger targets and returned $1.6 billion to investors.

    Then there’s the startup world, which for over a half-decade was known for minting unicorns.

    Last year, investors plowed $325 billion into venture-backed companies, according to EY’s venture capital team, peaking in the fourth quarter of 2021. The easy money is long gone. Now companies are much more defensive than offensive in their financings, raising capital because they need it and often not on favorable terms.

    Venture capitalists are cashing in on clean tech, says VC Vinod Khosla

    “You just don’t know what it’s going to be like going forward,” EY venture capital leader Jeff Grabow told CNBC. “VCs are rationalizing their portfolio and supporting those that still clear the hurdle.”

    The word profit gets thrown around a lot more these days than in recent years. That’s because companies can’t count on venture investors to subsidize their growth and public markets are no longer paying up for high-growth, high-burn names. The forward revenue multiple for top cloud companies is now just over 10, down from a peak of 40, 50 or even higher for some companies at the height in 2021.

    The trickle down has made it impossible for many companies to go public without a massive markdown to their private valuation. A slowing IPO market informs how earlier-stage investors behave, said David Golden, managing partner at Revolution Ventures in San Francisco.

    “When the IPO market becomes more constricted, that circumscribes one’s ability to find liquidity through the public market,” said Golden, who previously ran telecom, media and tech banking at JPMorgan. “Most early-stage investors aren’t counting on an IPO exit. The odds against it are so high, particularly compared against an M&A exit.”

    There have been just 173 IPOs in the U.S. this year, compared with 961 at the same point in 2021. In the VC world, there haven’t been any deals of note.

    “We’re reverting to the mean,” Golden said.

    An average year might see 100 to 200 U.S. IPOs, according to FactSet research. Data compiled by Jay Ritter, an IPO expert and finance professor at the University of Florida, shows there were 123 tech IPOs last year, compared with an average of 38 a year between 2010 and 2020.

    Buy now, pay never

    There’s no better example of the intersection between venture capital and consumer spending than the industry known as buy now, pay later.

    Companies such as Affirm, Afterpay (acquired by Block, formerly Square) and Sweden’s Klarna took advantage of low interest rates and pandemic-fueled discretionary incomes to put high-end purchases, such as Peloton exercise bikes, within reach of nearly every consumer.

    Affirm went public in January 2021 and peaked at over $168 some 10 months later. Affirm grew rapidly in the early days of the Covid-19 pandemic, as brands and retailers raced to make it easier for consumers to buy online.

    By November of last year, buy now, pay later was everywhere, from Amazon to Urban Outfitters‘ Anthropologie. Customers had excess savings in the trillions. Default rates remained low — Affirm was recording a net charge-off rate of around 5%.

    Affirm has fallen 92% from its high. Charge-offs peaked over the summer at nearly 12%. Inflation paired with higher interest rates muted formerly buoyant consumers. Klarna, which is privately held, saw its valuation slashed by 85% in a July financing round, from $45.6 billion to $6.7 billion.

    The road ahead

    That’s all before we get to Elon Musk.

    The world’s richest person — even after an almost 50% slide in the value of Tesla — is now the owner of Twitter following an on-again, off-again, on-again drama that lasted six months and was about to land in court.

    Musk swiftly fired half of Twitter’s workforce and then welcomed former President Donald Trump back onto the platform after running an informal poll. Many advertisers have fled.

    And corporate governance is back on the docket after this month’s sudden collapse of cryptocurrency exchange FTX, which managed to grow to a $32 billion valuation with no board of directors or finance chief. Top-shelf firms such as Sequoia, BlackRock and Tiger Global saw their investments wiped out overnight.

    “We are in the business of taking risk,” Sequoia wrote in a letter to limited partners, informing them that the firm was marking its FTX investment of over $210 million down to zero. “Some investments will surprise to the upside, and some will surprise to the downside.”

    Even with the crypto meltdown, mounting layoffs and the overall market turmoil, it’s not all doom and gloom a year after the market peak.

    Golden points to optimism out of Washington, D.C., where President Joe Biden’s Inflation Reduction Act and the Chips and Science Act will lead to investments in key areas in tech in the coming year.

    Funds from those bills start flowing in January. Intel, Micron and Taiwan Semiconductor Manufacturing Company have already announced expansions in the U.S. Additionally, Golden anticipates growth in health care, clean water and energy, and broadband in 2023.

    “All of us are a little optimistic about that,” Golden said, “despite the macro headwinds.”

    WATCH: There’s more pain ahead for tech

    There's more pain ahead for tech, warns Bernstein's Dan Suzuki

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  • Stocks making the biggest moves midday: Peloton, Tesla, Viasat, Wells Fargo, Box and more

    Stocks making the biggest moves midday: Peloton, Tesla, Viasat, Wells Fargo, Box and more

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    A Tesla electric vehicle at a supercharger station in Hawthorne, California, on Aug. 9, 2022.

    Patrick T. Fallon | AFP | Getty Images

    Check out the companies making the biggest moves midday Monday:

    Credit Suisse — Shares of Credit Suisse rose 1.7%, reversing an earlier slump that sent the stock to a record low, after the bank over the weekend made a series of calls to calm investor fears about its financial health. In addition, the cost to insure the bank’s debt against default jumped to a new high.

    Tesla — Tesla shares dropped 8.2% after the electric vehicle maker said it delivered 343,000 vehicles in the third quarter, less than analysts expected. However, Wall Street analysts were divided over the report.

    Peloton — Peloton shares rose more than 6% after the exercise-equipment company announced it will put bikes in all 5,400 Hilton-branded hotels in the U.S. Peloton is trying to engineer a turnaround and also said last week that its bikes, treadmills and other hardware would be sold in Dick’s Sporting Goods locations.

    Roblox — Shares of the gaming platform fell slightly after MoffettNathanson initiated coverage with an underperform rating. The Wall Street firm said it’s too soon to tell whether Roblox will ever meet its metaverse ambitions.

    Viasat — Viasat jumped 28% on Monday after striking a deal with L3Harris to sell its tactical data links business. The deal is for just under $2 billion, the companies announced. Viasat said it would use the cash to reduce its leverage and increase liquidity.

    Wells Fargo – Wells Fargo’s stock gained 3% after Goldman Sachs upgraded the bank to a buy rating from neutral and said investors are underappreciating its potential.

    Livent — The lithium company dropped about half a percent after Bank of America downgraded the stock to underperform from neutral, citing “limited upside.”

    DocuSign — DocuSign dropped slid 2.4% after being downgraded by Morgan Stanley to underweight from equal weight, citing pricing pressure.

    Myovant Sciences — The biopharmaceutical company jumped 36% after it rejected a bid by Sumitovant Biopharma, its largest shareholder, to buy the shares it doesn’t already own for $22.75 per share. Myovant, which said the offer significantly undervalues the company, said it is open to considering any improved proposal.

    Box — Box’s stock rallied 7% after Morgan Stanley boosted its price target, implying the cloud storage company could surge 39% from Friday’s close. The firm also upgraded the stock to overweight from equal weight, citing solid macro positioning, strong execution and a more favorable competitive landscape.

    Freshpet — Shares of Freshpet rose 7.6% after Barron’s reported the pet-food maker has hired bankers to explore a potential sale.

    LogicBio Therapeutics — Shares of the clinical-stage genetic company skyrocketed more than 644% after it announced it was being acquired by AstraZeneca for $2.07 per share. That price tag is a whopping 666% increase from LogicBio’s closing price of 27 cents per share.

    InterDigital — InterDigital’s stock rallied 16% after the research and development company raised its guidance for third-quarter 2022 total revenue a range of $112 million to $115 million, up from $96 million to $100 million.

    Fluor Corp. — Fluor rose more than 5% in midday trading. The company announced Monday it was awarded two reimbursable engineering, procurement and construction management contracts by BASF for work in China.

    Stanley Black & Decker — The tool maker’s stock jumped more than 4% after The Wall Street Journal reported that the company has eliminated about 1,000 jobs in an effort to cut about $200 million in costs.

    Energy stocks — Oil prices jumped, pushing energy stocks higher. Marathon Oil rallied 8%. APA Corp. and Devon Energy gained about 7% each. Diamondback Energy, Halliburton and ConocoPhillips were all up more than 6%.

    — CNBC’s Alex Harring, Samantha Subin, Carmen Reinicke, Yun Li, Tanaya Macheel and Jesse Pound contributed reporting.

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