Tech stocks will face a backlash

Just five tech stocks account for nearly 20% of the S&P 500’s total market value. But the bigger they grow, the bigger the risk of a political backlash.

Is this dotcom bubble 2.0? asks Robin Pagnamenta in The Daily Telegraph. Almost 20 years after the dotcom crash tech stocks have once again reached dizzying heights. Apple and Microsoft are now worth a combined $2.8trn. That is more than Great Britain’s entire annual GDP. Yet where the dotcom bubble was marked by the overvaluation of “flimsy” start-ups, today’s tech giants are “mature companies which earn real money”. 

Just five stocks – Facebook, Apple, Amazon, Microsoft and Google-owner Alphabet – account for nearly a fifth of the S&P 500’s total market value, notes Akane Otani in The Wall Street Journal. That is the highest level since the dotcom bubble peaked. Yet today’s valuations are far less stretched: the five leading lights of the dotcom boom traded on 47 times expected earnings, against 30 today. The tech firms also enjoy much more resilient earnings this time. 

In 2018 it was fashionable to talk of a coming “techlash” against Silicon Valley from consumers and regulators, says The Economist. Yet what followed was a “jaw-dropping bull run”: shares in the five biggest US tech firms are up 52% over the past 12 months. Yet perhaps more disturbing than talk of a new bubble is the possibility that we are not in a bubble and that the tech giants really are destined to disrupt and control ever more sectors of the economy. The bigger they grow, the bigger the risk of an almighty political backlash.

Recommended

Chase Coleman: star hedgie hits the panic button
People

Chase Coleman: star hedgie hits the panic button

Chase Coleman got off to a sizzling start in the hedge-fund industry and became one of the biggest winners of the tech bull market. His fall from grac…
28 May 2022
How the West can win Putin’s war on food
Global Economy

How the West can win Putin’s war on food

The West could easily make up the shortfall if it let the free market rip, says Matthew Lynn.
28 May 2022
Which companies will lose the most from the energy windfall tax?
Energy stocks

Which companies will lose the most from the energy windfall tax?

The government’s new energy windfall tax has muddied the waters for investors and companies alike. Rupert Hargreaves explains how it might affect some…
27 May 2022
The MoneyWeek Podcast with Russell Napier at the Library of Mistakes
Investment strategy

The MoneyWeek Podcast with Russell Napier at the Library of Mistakes

Merryn talks to Russell Napier about Edinburgh’s Library of Mistakes, the age of debt and financial repression, plus why he has never invested in Chin…
27 May 2022

Most Popular

Scottish Mortgage Investment Trust has fallen hard. But is now the time to buy?
Investment trusts

Scottish Mortgage Investment Trust has fallen hard. But is now the time to buy?

After a spectacular couple of decades, the Scottish Mortgage Investment Trust has fallen by almost 45% so far this year. Rupert Hargreaves asks if no…
26 May 2022
The world’s hottest housing markets are faltering – is the UK next?
House prices

The world’s hottest housing markets are faltering – is the UK next?

As interest rates rise, house prices in the world’s most overpriced markets are starting to fall. The UK’s turn will come, says John Stepek. But will …
23 May 2022
Is it time to pick up growth stock bargains yet?
Investment strategy

Is it time to pick up growth stock bargains yet?

If you’re thinking of picking up some bargains from the tech stock crash, beware – there are still plenty of “growth traps” out there. John Stepek exp…
26 May 2022