Big Tech’s disaster scenario just played out, and now the bounce back is beginning. Inflation is moderating, the Federal Reserve is relaxing, cost discipline is back, and expectations are so low they’re getting easy to beat. Suddenly, the tech giants have momentum again.

Already this year, Meta stock is up 51%, Amazon is up 31%, Alphabet is up 20%, Apple is up 20%, and Microsoft is up 10%. All are healthily beating the S&P 500, even with some muted earnings reports this week. As tech analyst Dan Ives put it in a DM Thursday, “Huge rebound underway.”

Big Tech’s share prices are still well below their all-time highs — and the rebound will be slow — but they’re poised for a comeback now that certainty is returning to the economy. As inflation soared and the Fed raised interest rates rapidly, investors stayed away from the tech giants. Each rate hike made their undisciplined pandemic-driven spending look worse. And Wall Street couldn’t properly value them without knowing when the pain would end. 

Now that Fed chair Jerome Powell has started tailing off his rate hikes, using “deflationary” as a buzzword this week, investors are returning. Powell’s Fed raised the federal funds rate by .25% on Wednesday, ending a series of larger raises between .5% and .75%. This explains at least some of Meta’s 23% share price jump on Thursday. And Ives expects even more money will flow in soon. “So many institutional investors are underweight tech,” he said. “Now with earnings season showing more stability, cost cuts in motion, and ripped band-aid off on guidance, they need to reposition ASAP.”

The tech giants are well-positioned for a rough economy. They’ve made cuts, including sizable layoffs, well before other industries. And people’s expectations of them have dropped so far that they should be able to deliver. These companies are learning how to telegraph their preparedness to Wall Street, and it’s working. On Meta’s earnings call Wednesday, Mark Zuckerberg emphasized that 2023 would be its “Year of Efficiency,” a message investors loved. And Amazon on Thursday guided to slower growth this year without giving up the day’s gains.

There’s also product energy inside the tech giants that hasn’t been there for years. Recent AI advances renewed the competition between Microsoft and Alphabet, sent companies like Meta and TikTok into a tizzy as they imagine new creative features, and put new entrants — like OpenAI — into the conversation. Meta and Alphabet’s leadership spoke at length about their vision for AI on their earnings calls this week.

The economy may still fall into a recession, especially as the Fed continues to (slowly) raise interest rates while growth contracts. And Apple’s earnings report Thursday — a miss on everything but iPad — didn’t exactly instill confidence that consumer spending will roar back. But as runaway inflation fears subside, the type of predictably you need to buy big-ticket items like advertising, cloud hosting, and computing devices is starting to return. Which is good news for the tech giants. Though it won’t be a straight line upward, it’s fair to say Big Tech hit bottom and is now ascending.

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What Else I’m Reading

OpenAI built a tool to detect whether writing is human or AI-generated (it’s pretty good) [Axios]

Why AI image generation sucks at hands [BuzzFeed News]

GPT-4 is coming to Bing [Semafor]

The HomePod is back [The Verge]

Instagram’s founders built a news app [Platformer]

Were the Big Tech layoffs a way to control workers? [LA Times]

Bosses are back in charge [WSJ]

See a story you like during the week? Tweet it with “tip @bigtechnology” for consideration in this section.

Number Of The Week

$5,474

Average credit card user’s balance in the U.S., up 13% over last year.

Quote Of The Week 

"Meta ate Snap’s lunch because Meta is a shark and Snap is a minnow. Now, the bull case for the app depends on Snap doing to TikTok what Meta did to it."

Analyst Michael Nathanson on Snap’s 

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