The bloodbath in technology stocks has claimed its latest victim: the London Stock Exchange. As jitters from Wall Street’s aggressive sell-off crossed the Atlantic, the FTSE 100 shed over 2% in early trading, with the tech-heavy FTSE 350 index faring even worse. The trigger was a brutal session in New York where the NASDAQ Composite plunged 3.5% after disappointing results from chipmaker Nvidia and a surprise rate hike by the Federal Reserve. But this is not just a case of transatlantic contagion. London’s own tech darlings are feeling the heat, with investors suddenly waking up to the fact that many of them are still loss-making and trading at sky-high price-to-sales ratios.
The rout is particularly painful for stocks that had been propped up by the 'stay-at-home' trade during the pandemic, such as Rightmove and Ocado. Rightmove, the property portal, fell 8% after reporting a slowdown in listing growth, while Ocado, the online grocer, dropped 12% on fears that its partnership with Kroger in the US is stalling. Even stalwarts like Sage Group and Aveva are not immune, down 5% and 7% respectively. The market is pricing in a new reality: higher interest rates for longer, which means the present value of future cash flows for tech companies shrinks dramatically. In plain English, investors are demanding profitability now, not promises.
But there is a darker undercurrent to this sell-off. I have spent years in Silicon Valley watching the dance between hype and substance, and what we are seeing in London is a long-overdue reckoning. The SoftBank effect, where Vision Fund poured billions into WeWork and Uber, created an entire ecosystem of 'tech' companies that were anything but. Many London-listed tech firms have been riding that wave, but the tide has turned. The question is: which of these companies have genuine technological moats, and which are just legacy businesses with a thin layer of digital varnish?
Take Darktrace, for instance. The cybersecurity firm was once a market darling, but its stock has fallen 40% this year after allegations of accounting irregularities. Or look at Wagestream, the financial wellness app, which dropped 15% on fears that its business model of earning fees from employees is not scalable. These are not high-tech disruptors. They are services wrapped in a tech narrative, and the market is no longer buying it.
For the average investor, this rout feels like a Black Mirror episode where the algorithm that was supposed to make everything smarter turns out to be just a fancy spreadsheet. The user experience of society right now is anxiety, and that is showing up in the stock market. But here is the thing: genuine technology, the kind that solves real problems, will survive this purge. Quantum computing companies see this as a buying opportunity. AI ethics firms are about to be overwhelmed with business as companies rush to prove they are not just bots with business cards. And the companies that digitise fundamental sectors like energy or healthcare? They are the ones to watch.
The chaff is burning off. What remains will be the true digital sovereignty of the UK. For now, though, the blood is still in the streets, and the algorithm says to run.
