A top economist has made a grim prediction about Dublin's soaring tech industry.
Giant companies like Google, Meta (formerly Facebook) and Twitter all have their European headquarters in Grand Canal Dock. Such is the concentration of tech companies in the area, it was dubbed Silicon Docks.
The value of the stocks for these tech giants had being going from strength to strength in recent years which was largely used for investment. However, the value of these stocks have been in rapid decline with the globe's biggest tech companies losing a $1 trillion in just three days over the summer.
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And, this week saw both Twitter and Stripe, the online payment company, shedding a significant number of their staff - both of which have offices in Dublin. Economist David McWilliams likened the collapse of the tech stocks to New York's "cockroach theory" and warned Dublin's "tech dream" may end next year.
He told a recent episode of the David McWilliams podcast: "If you are in New York... Americans have this expression, 'cockroaches never come in ones'. If you see a cockroach, it means there are a thousand in your apartment. They never come in ones.
"The cockroach theory of tech is that these balance sheets don't implode in ones. So, it is not just Microsoft or Metaverse. Basically what has happened is so much money has gone into these things [tech companies] that the [share] prices have shot through the roof."
He added: "Now people are realising, hold a second, these guys are all hype... when one bad earnings comes in, the bulls in the bull market say 'it is just that company, it is an exception'.
"Bullsh*t, what is actually happening is they all have bad earnings and this is what happens. It is like one cockroach leading to loads of cockroaches."
He added that this is like the second tech bubble - the first being the dot com bubble in the early 2000s - but it is "much bigger and bursting right in front of our eyes".
A number of global factors have changed investors perception of risk and led to the collapse of tech stocks, Mr McWilliams said. The factors include high inflation, crises in Europe, central banks tightening up their policies and the Chinese property market collapsing.
He said: "All these things are coming together which are totally changing the perception of risk. There are these ideas in the markets called 'risk on' and 'risk off'.
"When risk is on all bad news is discounted as unique and just one cockroach but when it is risk off everything that is bad is amplified. That is exactly what is happening in the tech markets."
The economist continued that the collapse of tech stocks, and the need for cutting costs and saving money, may well impact on Ireland's massive corporate tax takes. He said: "These large [tech] companies, Ireland has either made a bet on or has been betted on by them. So, you know our huge corporation tax increase - a lot of that is coming from large tech companies like Facebook and Google... who are selling ads in Dublin.
"Now, the focus on all of these is going to be like Rishi Sunak - saving money, cutting costs and balancing budgets. All the stuff the tech guys have never done."
Mr McWilliams concluded that the cuts tech companies impose may well end Dublin's "tech dream". He said: "The implication for Dublin is that a little bit of the dynamo, of the free dynamo, that was generating down in silicon docks and peculating down to high end restaurants, apartments and into excessive tax takes may well stop.
"So, 2023 could be the year that that tech not bubble but dream and naivety evaporates and evaporates very quickly."
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