Tesla recently surpassed $1 trillion, a mark which Google, Microsoft, and Apple have already achieved. Amazon is now valued at $1.7 trillion. Together, they make a collective worth of $10 trillion. The market cap of the entire S&P 500 is $41.8 trillion. Go figure.
Big tech companies are seeing a steep increase in their revenue. A massive shift in market valuation and revenue can be attributed to several factors and besides, the earnings are also drawing a lot of attention. For instance, a host of antitrust lawsuits are currently ongoing against companies like Alphabet and Facebook. Whistleblowers continue to target companies who are sucking up the lion’s share of market revenue by merging and acquiring smaller competitors.
One big reason could be the pandemic.
When the world was reeling under the aftermath of a deadly virus, business continuity was left in the hands of a few tech companies. Their assistance was required by every organization, whether it was a small brick and mortar store or a government-run institution. “Tech companies are still hiring feverishly as they move to take advantage of a world shifting increasingly to digital as a result of the coronavirus, despite mass lay-offs elsewhere and growing concerns over plummeting global markets.” reported Financial Times. A massive demand from the market and its subsequent delivery brought in billions of dollars for the big tech companies, which resulted in their monopoly and huge balance sheets.
The earnings of GAFAM could be another reason.
Internet has turned out to be the most used communication medium of information, knowledge, and entertainment in today’s world and 5 companies mainly contribute to the process – which is GAFAM. Google, Amazon, Facebook, Apple, and Microsoft or in short, GAFAM, are five tech giants that boast of a user base that surpasses billions and a net worth that surpasses trillions.
All GAFAM companies made an identical growth in 2020-21, whether it was earnings or influence. Mark Zuckerberg’s idea of turning Facebook into Meta is driving even more investments – a valuation of $930 billion, to be exact. Facebook recently revealed that it will hire 10,000 people to pursue its metaverse aspirations.
But how long will it stay like that?
Mike O’Rourke, chief market strategist with JonesTrading, says “Tesla’s rally is reminiscent of Cisco’s move in 2000, a move that marked the bubble top in 2000.” Cisco was believed to become the first trillion dollar company, but is only valued at $240 billion right now.
History has proven that staying a market leader is more difficult than becoming one.