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The Stocks to Rule Them All: Big Tech’s Might in Five Charts

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Techs market dominance in 5 charts

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The Stocks to Rule them All: Big Tech’s Might in Five Charts

American’s tech giants have caught the public’s attention as of late.

Four of the Big Five recently appeared in front of U.S. Congress to discuss their anti-competitive business practices and privacy concerns.

Yet business is booming. Compared to the traditional economy, Big Tech operates within an intangible realm of business. This enables them to move faster, cheaper, and more profitably—with business models that possess widespread scale via the internet.

The above five charts are a reflection of Big Tech’s momentum and the significant role they have played in the swift and vigorous market recovery. Let’s take a closer look at the data.

CompanyMarket Capitalization (In Billions)Weighting in the S&P 500 Index
Apple$1,9307.1%
Microsoft$1,5905.9%
Amazon$1,5905.9%
Alphabet$1,0303.8%
Facebook$7422.7%
Total$6,88325.41%
S&P 500 $27,050100%

Not All Stocks Are Created Equal

Of the 505 stocks that make up the S&P 500 Index, only about a third have experienced positive returns year-to-date (YTD), with the remaining stocks in the red.

Despite the majority of companies underperforming, the S&P 500 has generated a positive year-to-date return. This is due to the fact that companies are weighted according to market capitalization. For example, the Big Five now represent 25% of the index, despite being just five of the 505 stocks listed.

Big Tech’s dominance is being driven by ballooning market valuations. For instance, Apple reached the $1 trillion valuation in August 2018, and now the company is awfully close to topping the $2 trillion mark after just two years. This is just one of many examples that illustrate the growing power of Big Tech.

Pandemic Proof?

The five Big Tech companies are also seeing business as usual, with revenues in the first half of the year growing steadily compared to the first half of 2019.

CompanyYTD Price ReturnsRevenue Growth (H1 2020 vs. 2019)
Apple52%6%
Microsoft31%14%
Amazon68%34%
Facebook24%14%
Alphabet11%6%
S&P 5004.5%

Their respective stock prices have followed suit, adding to the divergence between the performance of tech and the overall S&P 500 Index.

The equal-weighted S&P 500 Index provides diversification, but it has underperformed recently. Year-to-date, the equal-weighted index is down -3.5% relative to the positive 4.5% seen for the S&P 500, a spread of 8%. The combination of Big Tech’s outperformance and large weighting is likely behind the index staying afloat.

Dissecting the Disconnect

You may notice the phrase “stock market disconnect” reverberating recently, reflecting consumer views on the state of financial markets and their relationship with the economy, or lack thereof. While the economy combats record levels of unemployment and a plethora of bankruptcies, major American indexes edge closer to record highs.

This disconnect can be explained by the market capitalization weighted qualities of these indexes as well as the geographic source of company revenues in the S&P 500.

The most visible businesses to the everyday individual represent a small and vulnerable basket of companies that account for a undersized component of the stock market. No matter how clobbered they get, their effects on the market as a whole are miniscule.

A Global Footprint

In the era of globalization, American companies are more diversified than ever. Their revenue streams carry a greater global presence, meaning domestic revenues in the United States are less crucial than in times past. For example, the S&P 500’s foreign revenue exposure stands at 42.9% in 2018 and these figures are even higher for Big Tech stocks.

Revenues Recognized Outside of North America/America 
Apple55%
Microsoft41%
Amazon31%
Alphabet51%
Facebook54%
Average 46%

Big Tech has outdone itself by virtually any measure.

They’ve shown their capacity to translate headwinds to tailwinds, even under challenging economic circumstances. Going forward, estimates by analysts on Wall Street suggest that even more growth for these companies could be on the horizon.

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Charted: Tesla’s Unrivaled Profit Margins

This infographic compares Tesla’s impressive profit margins to various Western and Chinese competitors.

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Chart: Tesla’s Unrivaled Profit Margins

In January this year, Tesla made the surprising announcement that it would be cutting prices on its vehicles by as much as 20%.

While price cuts are not new in the automotive world, they are for Tesla. The company, which historically has been unable to keep up with demand, has seen its order backlog shrink from 476,000 units in July 2022, to 74,000 in December 2022.

This has been attributed to Tesla’s robust production growth, which saw 2022 production increase 41% over 2021 (from 930,422 to 1,313,851 units).

With the days of “endless” demand seemingly over, Tesla is going on the offensive by reducing its prices—a move that puts pressure on competitors, but has also angered existing owners.

Cranking up the Heat

Tesla’s price cuts are an attempt to protect its market share, but they’re not exactly the desperation move some media outlets have claimed them to be.

Recent data compiled by Reuters shows that Tesla’s margins are significantly higher than those of its rivals, both in terms of gross and net profit. Our graphic only illustrates the net figures, but gross profits are also included in the table below.

CompanyGross profit per carNet profit per car
🇺🇸 Tesla$15,653$9,574
🇺🇸 GM$3,818$2,150
🇨🇳 BYD$5,456$1,550
🇯🇵 Toyota$3,925$1,197
🇩🇪 VW$6,034$973
🇰🇷 Hyundai$5,362$927
🇺🇸 Ford$3,115-$762
🇨🇳 Xpeng$4,565-$11,735
🇨🇳 Nio$8,036-$19,141

Data from Q3 2022

Price cutting has its drawbacks, but one could argue that the benefits for Tesla are worth it based on this data—especially in a critical market like China.

Tesla has taken the nuclear option to bully the weaker, thin margin players off the table.
– Bill Russo, Automobility

In the case of Chinese EV startups Xpeng and Nio, net profits are non-existent, meaning it’s unlikely they’ll be able to match Tesla’s reductions in price. Both firms have reported year-on-year sales declines in January.

As for Tesla, Chinese media outlets have claimed that the firm received 30,000 orders within three days of its price cut announcement. Note that this hasn’t been officially confirmed by anyone within the company.

Tit for Tat

Ford made headlines recently for announcing its own price cuts on the Mustang Mach-E electric SUV. The model is a direct competitor to Tesla’s best-selling Model Y.

Chevrolet and Hyundai have also adjusted some of their EV prices in recent months, as listed in the following table.

ModelOld PriceNew PriceDiscount
Tesla Model Y Long Range$65,990$53,49018.9%
Chevrolet Bolt EUV 2023$33,500$27,20018.8%
Tesla Model Y Performance$69,990$56,99018.6%
Chevrolet Bolt 2023$31,600$26,50016.1%
Tesla Model 3 Performance$62,990$53,99014.3%
Hyundai Kona Electric 2022$37,390$34,0009.1%
Ford Mustang Mach-E GT Extended Range$69,900$64,0008.4%
Tesla Model 3 Long Range$46,990$43,9906.4%
Ford Mustang Mach-E Premium AWD$57,675$53,9956.4%
Ford Mustang Mach-E RWD Standard Range$46,900$46,0001.9%

Source: Observer (Feb 2023)

Volkswagen is a noteworthy player missing from this table. The company has been gaining ground on Tesla, especially in the European market.

We have a clear pricing strategy and are focusing on reliability. We trust in the strength of our products and brands.
– Oliver Blume, CEO, VW Group

This decision could hamper Volkswagen’s goal of becoming a dominant player in EVs, especially if more automakers join Tesla in cutting prices. For now, Tesla still holds a strong grip on the US market.

tesla US market share

Thanks, Elon

Recent Tesla buyers became outraged when the company announced it would be slashing prices on its cars. In China, buyers even staged protests at Tesla stores and delivery centers.

Recent buyers not only missed out on a better price, but their cars have effectively depreciated by the amount of the cut. This is a bitter turn of events, given Musk’s 2019 claims that a Tesla would be an appreciating asset.

I think the most profound thing is that if you buy a Tesla today, I believe you are buying an appreciating asset – not a depreciating asset.
– Elon Musk, CEO, Tesla

These comments were made in reference to Tesla’s full self-driving (FSD) capabilities, which Elon claimed would enable owners to turn their cars into robotaxis.

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