It's no secret that the bloom has come off the big-cap tech stocks like Amazon (AMZN) and Apple (AAPL). Collectively known as the "FAANGs" -- along with Facebook (FB), Netflix (NFLX) and Google (GOOG) -- the group peaked to great fanfare two weeks ago and has been on the fritz ever since. Amazon is struggling to stay above the $1,000-a-share threshold. Apple is down more than 7 percent from its recent high. You get the idea.
The pullback was driven in large part by concerns over extended valuations, as Goldman Sachs (GS) warned earlier this month that Amazon carried a price-earnings ratio of 89 vs. an average of 58 for a group of the biggest dot-com stocks back in 2000.
But I wonder if some nagging doubt is arising in the quality of the innovation these companies are pursuing. In recent weeks, at the risk of indulging in a little too much cynicism, it feels like they're hoping over some big fish -- if not jumping the shark outright.
Consider the big news from Tesla (TSLA) on Thursday: Recode reported the company is talking to music labels about creating its own streaming service. You know, like Pandora (P) did nearly two decades ago, like Amazon did with its Amazon Music as a stand-alone service last year, like Spotify has been doing for years, and like Apple started with Apple Music in 2015, ditching its purchase-only iTunes business model (which Steve Jobs was against, by the way).
This is also the area in which Jay Z's high-fidelity Tidal music service has struggled to find its footing since launching two years ago amid allegations of artificially inflated subscriber numbers.
One wonders what Tesla's motivation here is. It delivered just 76,230 cars last year -- Apple says it has 27 million Apple Music subscribers.
Apple deserves some ire as well, announcing the underwhelming HomePod smart speaker earlier this month to a collective shrug. Representing the first major hardware launch for the company since the Apple Watch, it's a large move into the smart speaker category Amazon pioneered with its Echo in late 2014. But you can't even get Apple's offering until December.
Meanwhile, at least in this area, Amazon is innovating aggressively. Its Echo Show -- featuring a tactile 7-inch screen -- which will be available for purchase later this month. While Business Insider research showed people were more likely to be aware of the HomePod than the Echo Show, Apple's entry is managing to generate less excitement.
How about Amazon's new Prime Wardrobe service? It lets you try apparel items at home before your credit card gets charged. Wall Street's verdict was immediate: Traditional brick-and-mortar retailer stocks were hammered.
But this is an idea competitors like Try.com have been pushing for years. And it just doesn't seem that convenient, to be honest.
However, when it comes to Amazon and innovation, the biggest question mark is last week's blockbuster news that it's buying Whole Foods Market (WFM) in a $13.7 billion deal. This continues CEO Jeff Bezos' long obsession with groceries -- and attempts to sell them online -- including dot-com era investments in HomeGrocer and Webvan. Both went bankrupt. And both were absorbed into Amazon.
Amazon has tried again more recently with AmazonFresh and Prime Pantry and derivatives of the theme with "store brand" Wickedly Prime products like these seaweed snacks.
Big thinkers at Harvard Business Review are trying to sniff out what Amazon's plans are exactly, but ostensibly it wants to move more into the brick-and-mortar world it has eviscerated. Like the Amazon Books stores its opening across the country in malls, which are supposed to be dying.
I guess the company has come full circle, going back to selling books printed on paper in physical locations staffed by humans.
But is that what's considered innovative these days? If so, I'm confused.