New names in big tech groups
STOCK MARKETS PUNISHED TESLA, AND IT IS AMONG THE WORST PERFORMERS ON THE S&P 500
‘R.I.P Mag 7’ is a line doing t he rounds in Silicon Valley as technology pundits’ debate which way Apple and Tesla will go. This has to do with the most recent numbers to have emerged out of both companies. Tesla with Elon Musk at the helm has been at the receiving end of a bad reception to its Electric Vehicles (EV) and competition from China. In turn, the stock markets have punished Tesla, and it is among the worst performers on the S&P 500. As for the Tim Cook-helmed Apple, it is under regulatory scrutiny in the US and other parts of the world for misusing its position as a dominant player. This hammering that Tesla and Apple are now receiving on the American markets are Mike O’rourke’s “I-told-you-so” moment. He is Chief Market Strategist at Jones Trading and earlier this year he published a note that it is time to relook at the moniker ‘Mag 7’. This is a cohort of Big Tech companies that include Apple, Amazon, Alphabet (Google), Meta (Facebook), Microsoft, Nvidia and Tesla.
The history of monikers given to tech companies in Silicon Valley has often indicated who will dominate technology for the next few years. On his part, O’rourke argues the world has changed significantly and it’s time to shift focus. By way of example, a school of thought in Silicon Valley argues that Nvidia and Meta, now called the ‘Terrific Two’, will define the future.
This is because Nvidia is a company that is one of its kind. What it churns out plays a crucial role in making computers, and a wide range of devices, smarter and more capable. They help in turning complex data into visually understandable formats, enable advancements in gaming and entertainment, and drive innovations in AI that can lead to breakthroughs in various fields, from medicine to autonomous vehicles. As for Meta, with products such as Facebook, Instagram and Whatsapp under its belt and an impressive financial performance, investors see value in its scale of global connectivity, ability to monetize this connectivity, and ongoing investments in future technologies.
Then there is another school of thought that argues this debate is entirely misplaced. Instead, if the numbers are anything to go by, Tesla and Apple ought to be pruned from ‘Mag 7’ and the cohort ought to be renamed as the Fab 5.
Silicon Valley has a long history of such debates. In the early 2000s, CNBC television host Jim Cramer coined the phrase FANG to describe Facebook, Amazon, Netflix and Google. A few years later, he made it FAANG to include Apple. After Netflix stopped being as hot and tech companies were overhauled, the acronym MAMAA came into being. This was Meta, Apple, Microsoft, Amazon and Alphabet (formerly Google). So, will it be Terrific Two or Fab 5?
Prashant Krishna of Valtrust Partners manages funds for high-net-worth Individuals (HNIS) and invests all over the world. Apple and Tesla, he reckons, will not be dropped. This, says Krishna, is because even t hough Tesla has reported a few bad quarters of earnings, it wouldn’t matter in the longer run. Tesla’s weak performance can also be attributed to the rise of EVS from China’s internet giant Baidu. “I am unsure it is eating into Tesla’s market share. In the US, Tesla dominates 50% of the market but given America’s current animosity with China, I doubt Baidu will get into the Top 3. So, Tesla should be safe,” he says.
Then there is Toyota. The company’s CEO has been vocally anti-ev and believes the market for it will taper off at 30%. This is despite evidence that countries such as Norway, Sweden and even China are on the verge of breaching his prediction. If these numbers are anything to go by, Krishna argues, it is foolish to write off Tesla yet. And why is Apple being punished by the markets? The fears are exaggerated he says and pulls the price charts out. The company’s stock prices are up as compared to what it was last year. “Buy a stock when magazines write it off,” he says, and smiles. Clearly, he’s buying it.
What then may a new moniker for tech be? Something that will reflect the new reality that includes entities in the biosciences as well perhaps!