Booming tech: what the experts think
$1,000 stock club
Amazon’s newest “real-world” bookstore opened in Manhattan last week, and analysts liked what they saw, said Tiernan Ray on Barrons.com. As JP Morgan noted, Amazon is “among a vanguard of online retailers” who are “experimenting and shaking up the bricksand-mortar experience, even as old retail implodes”. The mood was so positive that it helped push the company’s stock above $1,000 for the first time on Tuesday – the latest sign of “big, dominant tech companies driving the US market higher”, said Adam Shell in USA Today. Google’s parent company, Alphabet, is also “within a few bucks” of the magic “$1,000 stock club”. Should we raise a cheer, or worry?
Unhealthy influence?
Amazon, which is up more than 30% this year, and by 1,500% since the current equities bull market began in 2009, is one of a handful of tech stocks that have had an outsized impact on the wider market. The five biggest stocks in the S&P 500 (which include Alphabet and Amazon) “have accounted for nearly onethird of the index’s 8% gain this year”. That makes the wider index all the more “vulnerable” if they fall out of favour. As Michael K. Farr of the money-manager Farr Miller & Washington observes, many investors buying “passive” funds that track indexes, “have more exposure to tech than they think”. That should raise some “yellow flags”.
Softbank’s bazooka
When you ask Siri whether we are in a technology bubble, all that Apple’s digital assistant can offer is: “Interesting question”, said Robin Wigglesworth in the FT. Indeed it is. The total market capitalisation of the “Faangtastic five” (Facebook, Apple, Amazon, Netflix and Google) now stands at $2.4trn, making them “bigger than the French CAC 40 or Germany’s Dax, and nearly as large as the FTSE 100”. Bank of America points to “nascent signs” of an “overshoot”. Nonetheless, it’s “probably too soon to call time on the tech-powered rally” – particularly since the big cash keeps on rolling in. Softbank boss Masayoshi Son has just teamed up with the Saudis to launch “the world’s largest” tech investment fund, worth nearly $100bn, said The Economist. That should keep momentum going for a while.