While 2020 was the worst year for the global economy and employment since World War II, Big technology companies have seen their accounts and their leading position in the face of the competition skyrocket, including its valuation on the stock market.
The context is clearly favorable for Alphabet / Goole, Amazon, Apple, Facebook and Microsoft. Lockdowns and restrictions have put millions of people out of business, while the momentum of the digital economy is one of the few sectors that has grown by becoming more needed than ever.
In recent weeks the calls Big Tech or GAFAM have been presenting results of the first quarter of 2021 that give an idea of its growth after a year of pandemic:
Alphabet, Google’s parent, increased its revenues by 34% compared to Q1 2020 to 55,000 million dollars. An effervescence mainly starring its biggest business, advertising, especially on YouTube, where it grew by 48%.Amazon went even further by signing its second quarter with revenues above 100,000 million (+ 44%), tripling its profits from a year ago. And not only because of the evident boom in online shopping, but also because of the growth of its cloud services with AWS and its online advertising segment.Apple, meanwhile, broke revenue record despite the context of chip shortages. In his case during his second fiscal quarter, his income grew 54% compared to last year, and in addition to erasing the doubts about the sales of the iPhone 12, his growth in Services and Mac (surely sponsored by telecommuting) were also prodigious. .Facebook also grew 48% in their income compared to the last quarter before COVID-19 changed our lives. Not even the fact of not recovering the number of recurring users in the United States prevented its income and profits from soaring thanks to its advertising business.Microsoft, finally, also announced a growth of 19%, especially thanks to the sales of software and, above all, of its cloud solutions.
The markets responded with large increases in the stock market for all of them, except Microsoft, and that despite the fact that the company led by Satya Nadella does not stop growing. In the Wall Street Journal they argued that the stock market has become so used to surprising results, “that the good ones no longer work.”
Because precisely, the growth in the stock market of the shares of the large technology companies has been a separate point with respect to many other sectors. Since March 11, 2020, when COVID-19 hit the United States and the markets with a drop in the Nasdaq of more than 9%, all its titles have appreciated in an astonishing way.
The graph below shows how your market capitalization has increased from a year ago to now. Between them they have added more than 3 trillion (European) of valuation.
Apple has been the biggest winner as it has seen its market capitalization nearly double in the last year to slightly exceed $ 2 trillion. The pandemic has not curbed consumers’ willingness to spend on Apple products, which has sold a record $ 65 billion worth of iPhones during the Christmas quarter alone.
Apple’s big year has helped distance itself from Microsoft in the fight to be the world’s most valuable technology, as Microsoft is ‘only’ worth 1.8 trillion dollars after its capitalization has soared 55% since last March 2020.
All companies, of course, have benefited from a context where digital has become much more necessary, and the stock market itself seems to have recognized the giants almost as a safe haven.
Amazon has seen its share price jump from about $ 1,820 per share at this time last year to $ 3,220 today.. The equation with the company founded by Jeff Bezos is simple. While many small and medium-sized businesses were forced to close, Amazon’s set of businesses – e-commerce, hosting websites, Twitch and Audible, among others – came out relatively unscathed.
This trend has gone beyond the tech big 5 as well. Companies like Netflix and Zoom have seen their valuations skyrocket in the last year. Tesla, almost a case apart due to its enormous growth and its own dynamics, has also gone from trading its shares from the equivalent of 160 dollars a year ago to almost 590 today (Both Tesla and Apple made a split of their shares in full pandemic, which divided their number and their value).
However, the dichotomy between what we could call the real economy and the digital / technological one is palpable. The NASDAQ has risen 87% since last year around this time, while unemployment rates and the economic crisis were evident in almost all other sectors.
With this, it is normal for a Recurring comment in recent months is if there is a new technology bubble, similar to what happened with the dot-com explosion in the early 2000s. Stock market analyst Paco Lodeiro commented to Hypertextual that there is “Some similarities but also many differences”. A key piece of information is that in the late 1990s the average of companies listed on the NASDAQ was below 5 years. Now it is more than double.
The NASDAQ has risen 87% since last year around this time, while unemployment rates and the economic crisis were evident in almost all other sectors.
“During the dot-com bubble many companies went public as a mechanism to raise capital. Digital companies were seen with scalability and profitability potential that compensated for their loss at the time. Until it deflated ”, he told us.
Today big technology companies are no longer looking for capital. They are some of the largest companies in the world, and it cannot be said that the context is the same, although mechanisms such as the SPAC are making many new technologies and companies in the electric mobility sector find ways to make the leap to Stock market in search of financing, as Lucid Motors has done for example.
Lodeiro pointed out that the doubts fall on other technology boosted by the pandemic, such as Zoom Video Communications, the matrix of Zoom, the video calling software that has grown exponentially in users during this time. It was trading at $ 70 at the beginning of 2020 and now it is at more than $ 300, without having great barriers to entry – its model has competitors such as Skype or Meets – as Apple’s hardware and brand value do. huge logistics that Amazon has.
With investigations and lawsuits open on either side of the pond for almost all of them, the possible regulation It is the only way that it seems that it could diminish its hegemony today.
That, and perhaps the very competition between them. Amazon, Google, and Microsoft have been competing for cloud services for years, while new privacy features in the latest version of iOS may hamper Google and Facebook’s advertising businesses.
It also remains to be seen how the current context of chip shortages marks the future of those more focused on hardware, such as Apple itself or Microsoft. But, for now, what is clear is that after just over a year of the pandemic, Big Tech has gotten even bigger and more ubiquitous.