Tech’s big four defy Covid up­heaval by form­ing elite tril­lion-dol­lar club

Home work­ing rev­o­lu­tion has only en­trenched the dom­i­nance of the dig­i­tal gi­ants, finds Matthew Field

The Daily Telegraph - Business - - Technology Intelligen­ce -

‘Make Amer­ica Great Again” was the slo­gan across base­ball caps, buses and bumper stick­ers dur­ing US pres­i­dent Don­ald Trump’s elec­tion cam­paign.

Now, it is be­ing ap­plied to four tech­nol­ogy firms on a seem­ingly grav­ity-de­fy­ing surge, de­spite fears of a sec­ond coro­n­avirus wave.

The world’s four big­gest tech­nol­ogy com­pa­nies have gained more than $1.3 tril­lion (£1 tril­lion) in com­bined value since the start of the year. That com­pares to the $1.7 tril­lion com­bined mar­ket cap of all the FTSE 100 firms.

This has helped Wall Street to its best quar­ter since 1998, de­spite the US lead­ing the Covid charts with more than 55,000 cases per day. The four tech gi­ants – Mi­crosoft, Ap­ple,

Google’s par­ent com­pany Al­pha­bet and Ama­zon – are now all priced at more than $1 tril­lion in to­tal mar­ket cap. The buoy­ancy of th­ese stocks has even gained them the acro­nym “Maga”, be­stowed by the share price-ob­sessed Trump.

In Fe­bru­ary, the pres­i­dent said: “Four tril­lion-dol­lar com­pa­nies: Ap­ple, Ama­zon, Google, Mi­crosoft. You have Made Amer­ica Great Again. The tril­lion-dol­lar club.”

While their shares have surged – as have other so-called “Fang” stocks in­clud­ing Net­flix and Face­book – most have also torn up guid­ance. This means in­vestors do not know what to ex­pect from their next re­sults.

With earn­ings just a fort­night away, what is keep­ing th­ese tech­nol­ogy firms so far ahead of the mar­ket?

In pre­vi­ous fi­nan­cial crises, the dot­com bub­ble or the 2008 crash, tech stocks fell hard. But this time, they have thrived. “There has been a sec­u­lar, un­der­pin­ning trend,” says Richard Wind­sor, a tech­nol­ogy an­a­lyst at Ra­dio Free Mo­bile, for­merly of in­vest­ment bank No­mura. “Lock­down showed the start of the work-fromhome trend. That has ex­tended into the sec­ond quar­ter and will ex­tend be­yond the end of lock­down.”

He says that, while some pre­dicted most of­fice work­ers would be re­turn­ing to work, it now ap­pears many of th­ese roles in the near fu­ture will stay re­mote.

This trend has dis­pro­por­tion­ately ben­e­fited big tech­nol­ogy firms, as well as a num­ber of smaller, fast-grow­ing peers. Ama­zon’s Web Ser­vices busi­ness, which sells in­ter­net ser­vices to com­pa­nies, is in high de­mand across gov­ern­ments and in new sec­tors. Mi­crosoft’s Azure, its ri­val, is sim­i­larly well-placed, as are its work­place lines such as Mi­crosoft Of­fice and its video con­fer­enc­ing app Teams. Google, too, has been in­vest­ing in its own cloud com­put­ing busi­ness and work-fromhome apps such as Han­gouts.

Of the four, Wind­sor says Ap­ple may have the tough­est re­sults. De­mand for smart­phones has de­clined be­tween 10pc and 20pc. How­ever, Ama­zon ap­pears well po­si­tioned. “Ama­zon will have the best quar­ter of them all,” he says. “Peo­ple have con­tin­ued to or­der on­line. It has not suf­fered in ad­ver­tis­ing like Google has, and it has a lot of ex­po­sure to cloud com­put­ing.”

On Mon­day, Ama­zon hit an all-time high share price of more than $3,000.

It is up more than 61pc this year. Of the other tril­lion-dol­lar firms, Mi­crosoft is up 31pc, Al­pha­bet 10pc and Ap­ple 25pc. All have re­cov­ered their losses from the crash in March as lock­downs en­gulfed Europe and the US.

Th­ese rises leave Al­pha­bet worth $1.02 tril­lion, Ama­zon $1.52 tril­lion, Mi­crosoft $1.6 tril­lion and Ap­ple $1.62 tril­lion. With a com­bined value of

roughly $5.7 tril­lion, they are val­ued at more than triple the FTSE 100.

Mi­crosoft is now com­pet­ing with Ap­ple for sta­tus as the world’s most valu­able com­pany. A re­cent note from in­vest­ment bank Jef­feries ar­gued the firm “has a port­fo­lio of prod­ucts to sus­tain growth in any en­vi­ron­ment, be it in the of­fice or work from home”.

De­spite the soar­ing val­u­a­tions, Wall Street an­a­lysts have grown ever more bullish on tech­nol­ogy stocks. Mor­gan Stan­ley re­cently sent a note to clients ti­tled “Tech­nol­ogy Eat­ing the World”.

It said: “We are in the early in­nings of a tech­nol­ogy-driven, decade-long in­vest­ment cy­cle … im­por­tantly, Covid-19 is a wake-up call to ac­cel­er­ate this dig­i­tal trans­for­ma­tion.”

It is not just th­ese big four stocks boom­ing among tech, al­though com­bined they are worth more than the next 19 firms on the S&P 500.

Zoom, the video con­fer­enc­ing app, is up 280pc this year. Net­flix is up 50pc. Shopify, a US-listed Ama­zon com­peti­tor, is up 141pc. Tesla is now worth more than Toy­ota.

‘With a com­bined value of roughly $5.7 tril­lion, the four are val­ued at more than triple the FTSE 100’

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