Success of tech behemoths is mixed blessing

Anyone invested broadly in the U.S. stock market this past year can give thanks for the “Super Seven.

A handful of world-beating technology stocks have been on a tear, accounting for much of the market’s run to near-record territory.

The SP 500 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 rose nearly 50% and remained the world’s most valuable company. Altogether, the Super Seven were valued at more than $12 trillion at yearend.

The incredible dominance of these giant tech companies gives us pause as well as reason for optimism about this showy display of American innovation and business smarts.

On the downside, concentrating so much value in a few stocks is a ticket to volatility. Many U.S. stocks did not perform especially well last year. A sharp decline in those seven high-flyers could sink things in future years.

Moreover, concerns about excess market power and anti-competitive behavior have dogged the Super Seven, most notably Alphabet, which is embroiled in a showdown with trustbusters. The Justice Department and dozens of states accuse the company of using its money and influence to unfairly make Google the world’s default search engine, freezing out smaller competitors. The judge in the case could order the company to spin off its Chrome browser and Android operating system. Alphabet argues its product is so much better than anyone else’s that of course everybody wants it.

In surveys, American consumers say the tech giants put smaller businesses and consumers at an unfair disadvantage. Many employees at the Super Seven agree their employers are too powerful. 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 quarter-century ago. These companies are on a roll, minting money; their futures might be bumpy, but they look bright.

Importantly, U.S. tech companies have a strong record of investing in themselves, and the Super Seven are leaders in that area. They plow immense piles of cash into capital expenditures and research and development on everything from virtual reality systems to self-driving cars, cloud computing and artificial intelligence computing. Each company has a different niche, and Nvidia, the most recent to join this elite group, is the market’s hottest play in the potentially transformative AI sector.

One of the beauties of technology-research investments is that they typically lead to lower prices for consumers. The computing power available at a piddly cost to everyday people today would have been unfathomable a few decades ago.

Another beneficial side effect of these businesses is their contribution to national security. Staying on the cutting edge of artificial intelligence, chip design and cybersecurity is critical to America’s national interest. There’s no way any government could gather the smartest minds as effectively as the Super Seven, which provide lucrative employment opportunities for the best and brightest from across the globe. The result is a brain drain from elsewhere that stands to benefit the U.S.

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.