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.
-
Lloyds, Halifax and Bank of Scotland to shut another 45 branchesLloyds Banking Group, which includes Halifax and Bank of Scotland, is set to close a further 45 branches in 2024 - find out if a branch near you is closing.
-
US stock trading app Robinhood launches in the UK
The low-cost trading platform has opened another waiting list for British investors - following two failed attempts to launch in this country - and is hoping to be fully operational next year.
-
M&S shares shift from frumpy to fabulous as pre-tax profits are up by 56%
M&S is performing strongly and has announced it will pay a dividend for the first time since the pandemic.
-
The rise and fall of Sam Bankman-Fried – the “boy wonder of crypto”
Why the fate of Sam Bankman-Fried reminds us to be wary of digital tokens and unregulated financial intermediaries.
-
Three defence stocks set to flourish in an era of instability
A professional investor tells MoneyWeek where he’d put his money. Tom Bailey highlights three defence stocks that look promising.
-
EasyJet shares are volatile but enticingly cheap
The EasyJet group has shrugged off the cost-of-living crisis, restarted dividends and shares look good value.
-
The fallout from the war on landlords
Investors fleeing the market and the rise in rents are affecting us all.
-
Eight small-cap trusts to bet on
Funds investing in market minnows are out of favour, but the cycle will turn. Here are the best bets.
-
Trust in US TIPS to beat inflation
In an inflationary market TIPS, the US Treasury Inflation-Protected Securities are most compelling says Cris Sholto Heaton.
-
What is Vix – the fear index?
What is Vix? We explain how the fear index could guide your investment decisions.
