That “T” stands for TRILLION. That’s a #5 followed by 12 zeros:
$5,000,000,000,000
We learned from Business Insider that Alphabet (Google’s parent company) recently topped a $1T valuation. When combined with the valuations of Apple, Microsoft, Facebook, and Amazon, that makes the total value of the five biggest tech companies a record $5 TRILLION DOLLARS
The S&P500 information tech sector which includes Apple and Microsoft is up more than 5% year-to-date, and has outperformed all other groups in the benchmark index. This comes at a time when these tech companies are undergoing scrutiny from regulators and legislators. In the United States, there have been comments at political debates and even congressional hearings about these tech companies being monopolies. In the European Union where the companies have a significant influence, antitrust regulators are questioning them over their personal data collection policies.
Coincidentally, many of these tech companies are entering earnings reporting season as their values have soared. Bloomberg recently reported on this (Friday, January 25th) highlighting the concern of whether the markets were ready for such an unprecedented rally.
Twenty-six constituents are due to report quarterly results next week, including three of the four biggest U.S. companies, over one blistering 48-hour stretch starting Tuesday. With trillion-dollar-plus market capitalizations and a doubling in Apple Inc. since 2018 to account for, it’s possible investors will be in a less-forgiving mood than usual.
Bloomberg
According to that linked article, earnings in the tech sector overall have dropped 3% or more in each of the past three quarter, with computer and software makers anticipated to post a 0.8% profit contraction in the three months through December. However net income of the largest of the tech companies has increased.
Despite the recent quarterly hiccups, combined net income of five largest tech companies — Apple, Amazon, Microsoft, Alphabet and Facebook — totaled $40 billion in the third quarter, 38% above the same period two years ago.
Bloomberg
So what’s really going on? Is the tech industry as a whole being propped up by the giants at the top? Do the fundamentals justify their valuations?