Shares of major digital advertising players took a dive on Friday, reflecting growing investor anxiety over economic indicators and consumer sentiment. Alphabet (GOOG 0.02%), Meta Platforms (META -0.26%), and Netflix (NFLX 0.84%) all saw steep declines, with losses reaching as much as 4.6% by early afternoon trading. While no major company-specific news surfaced, a broader market pullback driven by economic concerns sent these stocks tumbling.
Inflation and Consumer Sentiment Rattle Investors
Fresh economic data released on Friday painted a worrying picture. The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures Index (PCE), showed core inflation at 2.8% year-over-year, surpassing expectations. Month-over-month, inflation rose by 0.4%, further fueling investor uncertainty.
Adding to the gloom, the University of Michigan’s consumer sentiment survey for March recorded a sharp decline. The index dropped to 57, a 28.2% decrease from last year, and below economists’ forecast of 57.9. This slump in consumer confidence cut across political affiliations, raising concerns that economic pessimism is not just politically driven but widespread.
Ad Budgets on Shaky Ground
Tech giants like Alphabet and Meta rely heavily on advertising revenue. With businesses tightening their budgets, ad spending could take a hit.
- Alphabet’s Google Search business dominates the global ad market, but economic slowdowns often lead to cuts in corporate advertising budgets.
- Meta’s advertising empire, which includes platforms like Facebook and Instagram, is similarly vulnerable to reduced marketing expenditures.
- Netflix, though traditionally subscription-based, is now increasingly reliant on its ad-supported tier introduced in 2022. The company had ambitious targets for advertising revenue growth in 2025, but those projections may now be under pressure.
Could Stagflation Be Looming?
With inflation remaining stubborn and consumer sentiment plunging, the threat of stagflation—a combination of slow economic growth and persistent inflation—is back on the radar. Markets tend to struggle under such conditions, as high inflation erodes consumer purchasing power while sluggish growth limits corporate profits.
While recession fears have not yet been confirmed by hard economic data, the warning signs are difficult to ignore. The ongoing uncertainty surrounding the Trump administration’s tariff policies only adds another layer of unpredictability to the market.
Is It Time to Buy the Dip?
Despite the selloff, some investors may see a buying opportunity. Among the three stocks, Alphabet appears particularly undervalued, trading at a price-to-earnings ratio of just 17.5—well below the average for the Magnificent Seven tech giants.
Unlike some competitors, Alphabet’s core search business remains strong, with little evidence of AI-driven traffic erosion so far. Meanwhile, its cloud division is not only growing rapidly but has also turned profitable, bolstered by the rise of generative AI applications.
Market sentiment remains fragile, but long-term investors may view Alphabet’s dip as an entry point. However, the near-term direction of tech stocks remains uncertain, leaving investors to weigh whether the worst is behind us or if further declines are on the horizon.
