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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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Markets

The Top Google Searches Related to Investing in 2022

What was on investors’ minds in 2022? Discover the top Google searches and how the dominant trends played out in portfolios.

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Trend lines showing when the top Google searches related to investing reached peak popularity over the course of 2022.
The following content is sponsored by New York Life Investments

The Top Google Searches Related to Investing in 2022

It was a turbulent year for the markets in 2022, with geopolitical conflict, rising prices, and the labor market playing key roles. Which stories captured investors’ attention the most? 

This infographic from New York Life Investments outlines the top Google searches related to investing in 2022, and offers a closer look at some of the trends.

Top Google Searches: Year in Review

We picked some of the top economic and investing stories that saw peak search interest in the U.S. each month, according to Google Trends.

Month of Peak InterestSearch Term
JanuaryGreat Resignation
FebruaryRussian Stock Market
MarchOil Price
April Housing Bubble
MayValue Investing
JuneBitcoin
JulyRecession
AugustInflation
SeptemberUS Dollar
OctoberOPEC
NovemberLayoffs
DecemberInterest Rate Forecast

Data based on exact searches in the U.S. from December 26, 2021 to December 18, 2022.

Let’s look at each quarter in more detail, to see how these top Google searches were related to activity in the economy and investors’ portfolios.

Q1 2022

The start of the year was marked by U.S. workers quitting their jobs in record numbers, and the effects of the Russia-Ukraine war. For instance, the price of crude oil skyrocketed after the war caused supply uncertainties. Early March’s peak of $125 per barrel was a 13-year high.

DateClosing Price of WTI Crude Oil
(USD/Barrel)
January 2, 2022$76
March 3, 2022$125
December 29, 2022$80

While crude oil lost nearly all its gains by year-end, the energy sector in general performed well. In fact, the S&P 500 Energy Index gained 57% over the year compared to the S&P 500’s 19% loss.

Q2 2022

The second quarter of 2022 saw abnormal house price growth, renewed interest in value investing, and a bitcoin crash. In particular, value investing performed much better than growth investing over the course of the year.

IndexPrice Return in 2022
S&P 500 Value Index-7.4%
S&P 500 Growth Index-30.1%

Value stocks have typically outperformed during periods of rising rates, and 2022 was no exception.

Q3 2022

The third quarter was defined by worries about a recession and inflation, along with interest in the rising U.S. dollar. In fact, the U.S. dollar gained against nearly every major currency.

Currency USD Appreciation Against Currency
(Dec 31 2020-Sep 30 2022)
Japanese Yen40.1%
Chinese Yuan9.2%
Euro25.1%
Canadian Dollar7.2%
British Pound22.0%
Australian Dollar18.1%

Higher interest rates made the U.S. dollar more attractive to investors, since it meant they would get a higher return on their fixed income investments.

Q4 2022

The end of the year was dominated by OPEC cutting oil production, high layoffs in the tech sector, and curiosity about the future of interest rates. The Federal Reserve’s December 2022 economic projections offer clues about the trajectory of the policy rate.

 202320242025Longer Run
Minimum Projection4.9%3.1%2.4%2.3%
Median Projection5.1%4.1%3.1%2.5%
Maximum Projection5.6%5.6%5.6%3.3%

The Federal Reserve expects interest rates to peak in 2023, with rates to remain elevated above pre-pandemic levels for the foreseeable future.

The Top Google Searches to Come

After a year of volatility across asset classes, economic uncertainty remains. Which themes will become investors’ top Google searches in 2023?

Find out how New York Life Investments can help you make sense of market trends.

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