Are tech titans teetering atop the market?
NEW YORK: Silicon Valley giants have become a gargantuan force on Wall Street, as demonstrated by Apple recently topping US$1 trillion in stock-market valuation.
But should we fear that a new tech bubble is ready to burst? Apple ended the formal trading week worth a history-making US$1 trillion.
Meanwhile, four other tech firms rounded out a list of the five most valuable companies based on share prices.
Amazon was worth US$889 billion; Google-parent Alphabet was valued at US$856 billion; Microsoft weighed in at US$828 billion, and Facebook was valued at US$513 billion.
Together, these companies account for about 20 per cent of US GDP, and more than Germany’s GDP.
Combined, the tech stocks account for more than 25 per cent of the value of the Standard & Poor’s 500, the index that includes the 500 largest companies listed in the US.
At the end of 1999, a few months before the infamous dot.com internet bubble burst, the five biggest companies on the stock market (Microsoft, General Electric, Cisco, Walmart and Intel) accounted for 15.5 per cent of US GDP, AJ Bell investment director Russ Mould recalled in a note.
“Anyone who owned those stocks at the market top suffered some serious portfolio pain,” Mould said.
“They lost money on those five names for the next decade.”He made it clear he was not predicting market woes for ‘FAANG’ stocks – those of Facebook, Amazon, Apple, Netflix and Google.
“However, it does warn against the dangers of blindly assuming that what is working now will work forever and that paying any price for a stock will be rewarded,” Mould said.
Nate Thooft of Manulife Asset Management told AFP that there was “no shortage of arguments” on why shares in those companies would continue to do well, but he saw wisdom in reducing ‘exposure a bit’ to reduce risk.
Investors 20 years ago, hurled money at just about any startup with a website, even if it wasn’t clear exactly how a given company was going to make money. — AFP