The tech sector is a sea of red on Friday afternoon. At the time of writing, the S&P/ASX All Technology Index (ASX: XTX) is down a disappointing 2.1%.
Among the worst performers on the index are the likes of Afterpay Ltd (ASX: APT), Redbubble Ltd (ASX: RBL), and Zip Co Ltd (ASX: Z1P)
In afternoon trade, the Afterpay share price is down 5% to $96.99, the Redbubble share price has crashed 11% to $3.26, and the Zip share price is down 4% to $6.66.
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What's happening?
Investors have been selling tech shares on Friday in response to weakness on Wall Street's Nasdaq index following a surprisingly softer than expected quarterly result by tech behemoth Amazon.
Amazon reported a 27% year-over-year increase in quarterly revenue to US$113.08 billion, which fell short of the analyst consensus estimate of US$115.20 billion.
Management blamed the miss on the company cycling elevated sales in the prior corresponding period and appeared to warn of further softness in the coming quarters.
In response to the release, the Amazon share price tumbled 7.5% in after-hours trade. This has led to Nasdaq futures pointing to a 1.4% decline on the tech-focused index tonight.
Why Afterpay, Redbubble, and Zip?
Investors appear concerned that Amazon's update and outlook could be an indication that investors are expecting too much from companies with ecommerce exposure, and particularly in the United States.
And with Afterpay, Redbubble, and Zip shares trading on such lofty multiples, any notable slowdown in their growth has the potential to lead to a de-rating to lower multiples.
In light of the above, investors will no doubt be keen to hear from these companies when they release their full year results next month. These results are likely to include a trading update on their respective performances since the end of the financial year and should reveal whether their growth is slowing or not.
