Editorial It’s good, worrisome that market’s 2023 run was fueled by just 7 tech giants
Anyone invested broadly in the U.S. stock market this past year can give thanks for the “Super Seven.” These seven world-beating technology stocks have been on a tear, accounting for much of the market’s run to near-record territory.
The S&P 500, which tracks 500 of the biggest stocks, was up 24% for 2023. The Super Seven, on the other hand, far outpaced those gains, with chipmaker Nvidia, electric vehicle-maker Tesla and Facebook parent Meta each more than doubling in value during the year. Amazon, Microsoft and Google parent Alphabet also rose by more than twice as much as the index.
Apple, the relative laggard of the group, still rose nearly 50%, and remained the world’s most valuable company, with a market capitalization of $3 trillion. Altogether, the Super Seven were valued at more than $12 trillion at year-end. That’s a 12 followed by 12 zeros.
So far, 2024 hasn’t been as kind, as profit-taking by investors has put a modest dent in those 2023 gains. Still, it would be a big surprise to see these stocks suffer a significant market downdraft this year.
The incredible dominance of these giant tech companies gives us pause — but also reason for optimism about this showy display of American innovation and business smarts.
On the downside, concentrating so much value in just seven stocks is a ticket to volatility. Many U.S. stocks did not perform especially well last year, even as the Super Seven lifted the overall U.S. market to impressive levels. A sharp decline in those seven high-flyers could sink things in future years.
Moreover, concerns about excess market power and anticompetitive behavior have dogged the Super Seven, most notably Alphabet, which is embroiled in a showdown with federal trustbusters.
At a trial last fall in Washington, the Justice Department and dozens of states accused the company of using its money and influence to unfairly make Google the world’s default search engine, freezing out smaller competitors. Closing arguments are scheduled for May, and the judge who will decide the case could conceivably order the company to spin off its Chrome browser and Android operating system. Alphabet’s characteristically immodest defense is that its product is so much better than anyone else’s that of course everybody wants it.
Separate legal cases in the U.S. and Europe accuse Alphabet of using its market power to monopolize online advertising. And earlier in December, after a monthlong antitrust trial involving Epic Games, maker of the hit video game Fortnite, a jury took just three hours to find Google at fault for anticompetitive behavior in its app store. The company has vowed to appeal.
In surveys, American consumers say the tech giants have far too much power, putting smaller businesses and consumers at an unfair disadvantage. Many employees at the Super Seven answer those surveys the same way, saying their employers are too powerful. That widely held opinion cuts across party lines. There’s bipartisan support for reining in the power of tech giants and holding them accountable.
Yet even as Europe makes progress on updating its rules and enforcing reasonable standards of conduct, the U.S. is left to litigate one case at a time, as a dysfunctional Congress fails to pass up-to-date legislation.
At the same time that we worry about the anti-competitive potential of Big Tech, we can’t help but marvel at its incredible success.
The lofty stock valuations aren’t an obvious case of speculative fever, as with the dotcom bust almost a quartercentury ago. These companies are on a roll, minting money; their futures might be bumpy, but they look bright.
Over the years, the stock market always had safe bets that seemed like sure things until, eventually, they petered out. The 30 stocks that make up the Dow Jones Industrial Average have had to be changed regularly, with dozens of comings and goings over the index’s century-plus history.
There’s no sure thing in the stock market, and that truism applies to the Super Seven of today. Enjoy their impressive run while it lasts, but watch closely to ensure their success doesn’t come at the expense of free markets and fair competition.
The Chicago Tribune