Tech stocks charge ahead
The pandemic has catapulted Big Tech to new heights, with the five biggest tech companies taking in combined revenue of $322bn during the first three months of the year.
The pandemic has “catapulted” Big Tech to new heights, says The Wall Street Journal. Apple, Microsoft, Amazon, Facebook and Google-owner Alphabet have all reported record revenue growth in the first quarter of this year. Apple sold $47bn of iPhones during the quarter, a 66% year-on-year jump. Google’s advertisement sales rose by 32% on the year to $45bn. Combined, these five firms are now worth over $8trn, nearly one-quarter of the total value of the S&P 500.
The big five took in combined revenue of $322bn during the first three months of the year, adds Richard Waters in the Financial Times. Their joint after-tax profits soared by 105% on the year to hit $75bn. Lockdowns meant the tech giants enjoyed a superb 2020, but the conventional wisdom had been that things would return to normal this year. Instead, these numbers suggest that Covid-19 delivered an online “reset” to our lifestyles. The Big Tech firms will continue to profit from the world’s newfound “digital dependence”.
Expensive for a reason?
It’s now clear that the tech giants were a “raging bargain” when their shares fell during the early days of the pandemic, writes Eric Savitz in Barron’s. Since last March Microsoft shares have gained 85% and Apple stock has soared by 135%. The latest earnings data shows that cloud businesses are roaring (see page 22), while e-commerce continues to conquer all. Even PCs are enjoying record-breaking sales growth. Steep valuations and the growing clamour for regulation are risks, but there “are no better plays for the post-pandemic world” than Big Tech stocks.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Tech shares were the standout market performers last year but have been adapting to the unaccustomed role of “market laggards” in 2021, says Jeran Wittenstein on Bloomberg. Investors have been rotating into cyclical sectors such as financials and industrials, which stand to gain from reopening and look far cheaper in comparison. On 41 times trailing earnings, the tech-focused Nasdaq 100 is at its priciest since 2004. The big question is whether those firms can convince investors that the huge structural shift towards digital is enough to justify such steep valuations.
The rise of Big Tech has driven the long-term outperformance of US shares. As David Brenchley notes in The Sunday Times, the MSCI USA index has gained 641% since the 2009 low; other global markets have risen by 246% over the same timeframe.
On some metrics US shares are now more expensive than at any time in history save for the eve of the 2000 dotcom bubble implosion. Some asset managers think there are still pockets of value stateside. Perhaps. But remember that as the world’s “biggest and most high-profile market”, the US is thought to be the hardest for stockpickers to beat.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Alex Rankine is Moneyweek's markets editor
-
HSBC returns to cost-cutting plan
HSBC is set to revamp its commercial banking division – but will it come at a cost?
By Dr Matthew Partridge Published
-
UK ranked as ninth-worst country for property investment
High taxes and rising transaction costs have put pressure on the UK's buy-to-let sector. Is the UK still profitable?
By Chris Newlands Published
-
HSBC returns to cost-cutting plan
HSBC is set to revamp its commercial banking division – but will it come at a cost?
By Dr Matthew Partridge Published
-
Will European stocks bounce back?
European stocks have looked unattractive for some time – will they bounce back?
By Alex Rankine Published
-
British American Tobacco goes smokeless – can it survive?
British American Tobacco’s core product is struggling, but new areas bode well, says Bruce Packard
By Bruce Packard Published
-
Pfizer shares rise as US investor takes $1 billion stake
Pfizer shares are on the up since US activist investor Starboard Value built up a stake in the drug maker. But strategic options appear limited
By Dr Matthew Partridge Published
-
LSL Property Services: a profit-machine in the property sector
LSL covers every area of the residential real estate market and should thrive after its shake-up
By Rupert Hargreaves Published
-
Top global fintech companies to invest in
One British fintech hogs the headlines, but there are two top performers in the US. We explain where you should put your money
By David C. Stevenson Published
-
Global car shares slide amid lower demand in China – what happens now?
Has the car sector run into trouble? Britain’s Aston Martin and Germany’s Volkswagen are among the key automobile brands that have issued profit warnings.
By Alex Rankine Published
-
Qualcomm could acquire rival Intel – but securing the deal won't be easy
A tie-up between Qualcomm and its semiconductor rival Intel would be a coup. But multiple regulatory and commercial hurdles lie ahead.
By Dr Matthew Partridge Published