Status shift

GOOGLE splashed out an undisclosed sum of money on April 14th to buy Titan Aerospace, whose solar-powered drones it plans to use to help deliver wireless internet access to remote parts of the world. Like Google’s new drones, which can reach impressive heights, tech shares soared in the early part of this year. Then in March a sell-off began that battered the stocks of many Silicon Valley stars. The tech-heavy NASDAQ stockmarket index steadied somewhat early this week, and shares in older tech firms like HP and IBM, which are traded on the main market, have done well. But investors and companies are still jittery.

Those worried that a new internet bubble pumped up by wild dreams and unabashed greed is now deflating will be watching closely to see whether tech firms’ latest results give further cause for alarm. On April 15th Yahoo published its quarterly earnings, which showed a tiny increase in revenue after excluding the cost of fees paid to its partner websites. Its shares rose on the news. Google was due to report its results the next day, after The Economist went to press.

It is not just web firms whose performance is under the microscope. Shares in biotech companies, which adapt and exploit processes found in living organisms to create drugs and other useful products, have also taken a beating. Having risen by 60% last year, the NASDAQ biotech index has fallen by 18% since the middle of March. On April 4th alone investors pulled $372m out of the multi-billion-dollar iShares NASDAQ Biotechnology exchange-traded fund—the biggest one-day withdrawal since the fund’s creation in 2001.

Other firms developing novel technologies have suffered sagging share prices, too. Tesla Motors, whose snazzy electric vehicles are a must-have in Silicon Valley, had a 350% run-up in its shares last year. This year they kept rising, reaching $240 in mid-March, by which time the market capitalisation of Tesla, which sold only 23,000 cars last year, was more than half that of GM, which sold almost 10m. They then started to slip, and on April 15th they closed at $194, as investors continued to debate the wisdom of the firm’s plans to invest $5 billion in a huge battery-making factory.

The shares of social-media companies have been especially badly hit, faring worse than both the NASDAQ and the broader S&P 500 index (see chart). This partly reflects concern over their ability to keep growing. Twitter has seen its share price fall from a high of just over $73 in December to around $46, as investors have fretted about falling advertising rates and levels of user engagement at the firm.

Say you want a revolution

Questions have also been raised about Facebook’s ability to keep growing strongly. “Social networks promised marketers a revolution, but what they have delivered is just boring traditional ads,” argues Nate Elliott of Forrester, a research outfit. That judgment may be a little harsh, but Facebook is certainly casting around for new sources of revenue. Among other things, it is trying to become a “Facebank” that offers services such as electronic money and international payments: it was reported this week that the firm was seeking a licence for such activities in Ireland.

Shares in some Asian web companies, such as Tencent of China, have fallen, too. But the news is not all bad. Yahoo, which has a stake in Alibaba, a giant e-commerce company, reported that the Chinese firm’s revenue soared in the last quarter of 2013. Alibaba is planning to list its shares in America this year.

There are plenty of other tech firms queuing to stage an IPO. Those looking for evidence of a bubble should keep an eye on upcoming listings for firms such as Box, a business founded in 2005 that has made a name for itself in online file-sharing and storage. Like Twitter it has significant revenues, but is not yet in profit. They should also keep a close eye on venture capitalists. American funds raised almost $9 billion in the first quarter of the year, the most since the last quarter of 2007. But plenty of venture money is now pouring into me-too firms and deals with crazy price tags. Recent events may have taken some air out of a tech bubble in the public markets, but financiers are still busy pumping one up behind the scenes.