[throwaway2037]

You wrote:

    They over-hired before interest rates went up, when borrowing money was essentially free.

I'm confused. As I understand, the wealthiest tech companys do not borrow money. Yes, they all have highly advanced treasuries to manage cashflows (different currencies, etc.), but they do not need to create liabilities (new debt) to run their businesses. They are cashflow positive and highly profitable.

Are you trying to say that as interest rates rise, the consumption part of the economy has slowed, thus profit growth has slowed at Big Tech? If yes, hmm, I half agree to attribute to layoffs. Mostly, I think they are cleaning house. A lot of people are working on projects that have little or no revenue potential. During economic weak periods, it is normal to close those projects.

[polskibus]

The big companies have debt, see https://www.microsoft.com/en-us/Investor/earnings/FY-2022-Q1... . It was often cheap for them to raise it in the past and quickly.

[thworp]

There is also another aspect in addition to sister comment: When interest rates are low, institutions with contractually agreed returns (pension funds and such) have to invest in riskier assets (stock, private equity, corporate bonds, riskier state bonds) to reach those targets.

When interest rates are where they should be they can just buy G8 government bonds. This leads to pretty big outflows from the stock and corporate bond markets.

Incidentally I think there is a huge blindspot (intentional or not) for the amount of economic pain this interest rate normalization will cause. After 10 years of negative real interest rates (central bank rate minus inflation) the economy and all its participants have become junkies. The withdrawal from the free money drug will be painful but neccesary.