The Four Horsemen of the Tech Recession

Abstraction: Four distinct causes behind tech-sector recession amid broader economic strength

Key points:

• The "four horsemen" are: (1) COVID hangover—pandemic pulled forward e-commerce and cloud demand, which is now reversing; Amazon doubled fulfillment footprint in two years and overbuilt; (2) hardware cycle—PC and consumer electronics had a COVID-era boom, now in trough; Windows OEM sales fell 39%, TSMC struggling to fill 7nm nodes; (3) end of zero interest rates—rising discount rates crushed SaaS valuations; long-term annuity-model revenue worth less when interest rates climb; (4) Apple's ATT recession—App Tracking Transparency destroyed the hub-and-spoke performance advertising model, hitting Meta, Snap, YouTube hardest
• The broader US economy added 517K jobs the same week major tech companies reported layoffs—illustrating the tech recession is sector-specific, not macroeconomic
• Eric Seufert coined "ATT Recession": companies like Nike (+17% YoY), Costco, and Walmart saw strong 2022 results while social ad platforms cratered; the pain traces directly to ATT disrupting behavioral ad targeting
• AWS and Azure growth slowdowns reflect both COVID demand pull-forward and ATT-driven decline in advertising compute spend, not general economic weakness
• Stratechery argues its own 2020 prediction that pandemic would permanently pull forward e-commerce was partially wrong—e-commerce is up from pre-COVID but well below pandemic highs

Connections: Amazon · Apple · Meta · Tech Recession · App Tracking Transparency · Cloud Computing · Digital Advertising

Source: https://stratechery.com/2023/the-four-horsemen-of-the-tech-recession/