After a momentous rally in the face of challenging global market conditions, top U.S. tech stocks have consolidated their dominance on the American equities market.
It might not be a great foil for current investigations into antitrust activities at the same companies, but regardless of the reasons, U.S. investors are now seeing vibrant growth in the top five technology stocks of that sector, even as many other companies experience stock value cratering. That’s showing how “tech-heavy” the American market is, for good or ill, even as the POTUS seeks to untether social platforms like TikTok and WeChat over concerns of Chinese spying potential.
Those spiking stocks, though, represent thoroughly American innovation: the renowned FAANG group composed of Facebook, Apple, Amazon, Netflix and Google now stands at a collective market cap of some $7 trillion or 25% of the entire equities market.
Many people intuitively point to the coronavirus as a prime mover of tech stock dominance, although this trend existed before the pandemic shut down brick-and-mortar stores and reordered our social lives.
Each of these massive technology companies has its own value proposition that has allowed it to prosper, even in an environment battered by U.S./China trade conflict, income inequality, war, disease, and runaway debt on the part of governments and municipalities.
Amazon, for example, has made its bones as an e-tailer delivering millions of packages to buyers. Apple and Google have put an OS-equipped smartphone in every pocket. Netflix has streamed enormous amounts of digital video into our homes. As for Facebook – the value proposition unique to Mark Zuckerberg’s Frankenstein probably needs no further explanation!
Reports today reveal that these stocks have become so colossally valuable that both Apple and Tesla are announcing stock splits to make per-equity prices reachable for the common citizen.
It might be appropriate to add a “T” to the end of the FAANG, since Tesla’s stock has simply exploded over the past few months. After imploding from around $1000 to about half of that value, Tesla’s stock rebounded to a handy $2200 and change, to the delight of Musk-focused investors.
The ostensible reason for the stock splits is to allow the average Joe to buy a single share of each tech mammoth for fewer hundreds of dollars. However, fractional stock ownership is already part of platforms like Robin Hood and others, so in the end, there might be ulterior motives for a 5-1 stock split.
In any case, investors should look very carefully at what tech stocks represent right now and what they might represent in the future. Is this runaway value spike going to continue, or will the market reorder to put big tech in its place?
